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R.    H.    F.    V  A  R  I  E  L 

ATTORNEY  AT  LAW 

LOB  ANGCLB8.   CAL 


f^m^mmm 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


\ 


OCT  30  1899 
^'    H.    F.    VARIEt 

ATTORNEY  AT  LAW 
LOSANQCLES,  CAt, 


■JSBCr  i. 


A   TREATISE 


ON  THE  LAW   OF 


BANKS    AND    BANKING, 


By  JOHN  T.  MORSE,  Jr. 


THIRD  EDITION. 

revised  and  re-arranged,  and  greatly  enlarged, 
By  frank  parsons. 


YOL.  I. 


BOSTON: 
LITTLE,   BROWN,    AND    COMPANY. 

1888. 


Copyright,  1888, 
By  John  T.  Morse,  Jr. 


University  Press: 
John  Wilson  and  Son,  Cambridge. 


PREFACE. 


The  work  of  Mr.  Morse  upon  Banks  and  Banking  has  met 
with  great  and  ever  increasing  favor  since  its  issue  in  1870. 
It  has  been  quoted  with  approval,  and  often  with  very  high 
commendation,  by  the  judges  in  nearly  every  supreme  court 
and  court  of  last  resort  in  the  country,  and  is  uniformly  re- 
ferred to  by  counsel  and  court  as  the  highest  authority  upon 
questions  of  banking  law. 

The  points  of  difference  between  this  edition  and  the  last 
arc  briefly  these :  the  text  has  been  broken  up  into  sections, 
with  head  lines  in  black ;  new  matter  has  been  added,  exceed- 
ing in  mass  the  whole  of  the  last  edition,  necessitating  the 
appearance  of  the  book  in  two  volumes ;  the  original  text  has 
been  carefully  revised,  rearranged,  and  in  part  rewritten,  in 
the  process  of  moulding  all  the  matter,  old  and  new,  into  con- 
sistent sections  ;  the  whole  has  been  carefully  re-indexed  ;  the 
text  of  the  National  Banking  Act  of  1864  has  been  replaced  by 
the  corresponding  text  of  the  United  States  Revised  Statutes 
of  the  edition  of  1878,  retaining,  however,  the  oy^der  of  the  law 
of  1864,  so  that  cases  which  refer  to  the  sections  of  that  law 
may  be  easily  handled  ;  the  laws  of  Congress  relating  to  bank- 
ing that  have  been  enacted  since  1878  will  also  be  found  in 
Part  Second,  together  with  notes  of  many  cases  construing 
the  national  banking  laws;  and  in  connection  with  the  text, 
throughout  the  book,  a  system  of  analyses  has  been  adopted 
at  the  heads  of  the  chapters  which  secures  the  advantages  of 
rapidity  and  grasp  incident  to  condensed  statement,  together 
with  the  accuracy  and  vividness  that  can  only  be  attained  by 
the  concrete  statement  of  cases  found  in  the  text,  and  which 
is  so  essential  in  the  making  of  a  book  that  shall  bo  useful 
to  lawyers  not  having  access  to  the  riches  of  a  law  libiary ; 


(oGl5S5 


iv  PREFACK. 

and  being  written  from  a  different  standpoint  from  that  of 
the  text  itself,  —  the  latter  aiming-  at  concrete  divisions  while 
the  analyses  seek  the  abstract, —  they  afford  much  additional 
light.  Section  310  is  a  good  example  of  the  vahie  of  these 
analyses.  That  section  is  a  composite  photograpli  of  all  the 
cases  on  the  "  Payment  of  Deposit."  Earnest  efforts  have 
been  made  to  secure  an  especially  exhaustive  treatment  of  all 
subjects  of  impoi-tance  in  banking  law  that  are  unsettled  or  in 
dispute  ;  such,  for  example,  as  the  effect  of  certification,  a 
bank's  responsibility  for  its  correspondent  or  notary,  and  the 
right  of  a  check-holder  to  sue  the  drawee.  The  changes  and 
additions  are  so  many  and  great,  that  the  present  volumes 
constitute  more  nearly  a  new  work  than  a  new  edition. 

In  the  edition  of  1870  the  cases  cited  numbered  about 
1,200 ;  the  second  edition,  in  1879,  added  417  cases ;  in  this 
book  the  authorities  cited  number  nearly  3,400,  or  more  tluin 
double  the  number  contained  in  the  second  edition.  The 
decisions  now  added  do  not  all  bear  date  after  1879,  nor  are 
they  all  strictly  banking  cases ;  some  are  quoted  because  they 
clear  up  our  subject  by  analogy.  But  making  all  due  allow- 
ances, the  figures  above  mentioned  indicate  extraordinary 
activity  and  uncertainty  in  this  branch  of  law.  There  is 
probably  no  department  of  law  that  is  growing  more  rapidly, 
or  in  which  there  are  a  greater  number  of  important  questions 
that  are  tlie  subject  of  conflict.  The  common  law  decisions 
in  the  various  States  are  at  war  all  along  the  line  of  banking 
law.  In  view  of  this  fact,  and  of  the  great  importance  of  a 
uniform  system  of  commercial  law  in  these  United  States, 
forming,  as  they  practically  do,  a  single  business  community, 
we  respectfully  suggest  the  feasibility  of  calling  a  convention 
of  delegates  from  each  State  to  subject  the  points  of  difference 
to  thorough  discussion,  and  recommend  such  legislation  as 
will  bring  the  law  into  harmony  upon  these  matters,  whicli 
have  no  relation  to  the  boundaries  of  States,  but  are  of  con- 
tinental or  world-wide  interest. 

TEANK  PAKSONS. 
Boston,  September,  1888. 


CONTENTS. 


All  references  are  to  Sections,  throughout  the  book.] 


Sect. 

CHAPTER   I.     Preliminary 0-12 

Scope  of  Book 1 

Definitions 2-5 

Sources  of  Banking  Law,  especially  of  Usage 6-9 

Conflict 

Between  State  and  Federal  Courts  .......  10 

Between  the  Laws  of  different  Sovereignties      .     .     .  11,  12 


PART   I. 
BANKS  AND  BANKING  IN  GENERAL. 

PREPARATION   FOR    BUSINESS. 

CHAPTER   II.     Organization  AND  Location    .     .     .     .  12  A -16 

Proof  of  Existence 14 

Ancillary  Powers  of  a  Bank 1.5 

Appointment  and  Qualification  of  Officers 16 

CHAPTER   III.     Official  Bonds  and  the  Liability  of 

Sureties 16  A -42 

Notes  on  Evidence,  Measure  of  Damages,  &c 42 

CHAPTER  IV.     By-Laws  and  their  Effect   ....    42  A-43 

BUSINESS    OF    THE   BANK. 
CHAPTER  V.     Time  and  Place 43  A -46 


VI  CONTENTS. 

CHAPTER   VI.     Business  Powers 40  A-71 

Express 47 

Jniplied 47 

Original 48-53 

Incidental 54-G7 

Kestrictions G8 

Statutory G9,  70 

Common  Law 71 


CHAPTER   VII.     Expansion  of  the  Poweus  of  a  Bank 

IN  Reference  to 71  A -78 

Purchase  of  Negotial)le  Paper 72,  7o 

Dealing  in  Real  Instate 74-76 

Handling  Stocks 77 

Saving  Debts 78 


OFFICERS    AND    AGENTS. 

CHAPTER  VIII.     General  Principles 79-113 

When  the  Agent's  Act  is  that  of  the  Bank 83-86 

Contractual  Acts 87-101 

Authority  of  Agent 96 

Express 97 

Implied  or  Inferred 98 

Adverse  Interest 99 

Revocation 100 

Ratification 101 

Tortious  Acts  .     , 102 

Representations 103 

Notice  to  the  Bank 104-112 

Competency  of  Bank  Officers  as  Witnesses  for  the  Bank  113 

De  Facto  Officers 98  i 


CHAPTER  IX.     Directors 114-141 

Authority 116-124 

Duty 125,126 

Liability 128-131 

To  the  Bank 128, 129 

To  Third  Parties 130, 131 

When  the  Bank  is  made  Liable  by  Directors   ....  126-132 

Contract 127 

Tort 132 

Crime 132 


CONTENTS.  Vll 

Sect. 
Notice 

To  the  Board 133 

To  a  Single  Director 134-137 

Rights  of  Directors 124, 125 

Qualifications 13!^ 

Continuance  in  Office 139 

Pay 140 

Kecords 141 


CHAPTER  X.     President 142-150 

Authority 143-145 

Duty 143 

Representations  and  Admissions 145 

Notice  to o     .     .  146 

Liability 

Of  Preside?it  to  Bank 147 

Of  one  held  out  as  President 148 

Personal  Undertakings  for  the  Benefit  of  the  Bank  .     .  149 

Pay 150 


CHAPTER   XI.     Cashier 151-176 

Inherent  Powers 153-164,  169 

Special  Authority 165 

Notice  to 166 

Declarations  and  Admissions 167 

Limitations  of  Time  and  Place 168 

Instruments  in  Form  to  or  from  the  Cashier    ....  170 

When  the  Cashier  binds  the  Bank 171 

Liability  of  Cashier  to  Bank 172 

Cashier's  Subordinates 174 

Cashier  after  Expiration  of  Charter 176 


DEPOSIT. 
CHAPTER  XII.     Receiving  Deposits 177-180  A 


CHAPTER  Xm.    Kinds  of  Deposit 182-187 

Special 183,184 

Specific .  18.5-187 

General 186,187 

Change  from  one  Kind  to  another 187 


Viii  CONTENTS. 

Sect. 

CHAPTER  XIV.     Special  Deposit lbQ-20i 

Definition 190 

Power  to  Receive 191-204 

Measure  of  Care  to  which  thu  Bank  is  held      ....  191-204 


CHAPTER  XV.     Specific  Deposits 200-212 

Dnty  of  Bank 207,  208 

Liability  of  Bank 209-212 

("IIAPTER   XVI.     Collection 213-263 

Nature  of  the  Contract,  its  Duties  and  Liabilities  in 
General. 


CHAPTER   XVII.     Liability  of  a  Bank  for    ....  264-287 

Default  of  Notary 265,  266 

Also  of  Collection  Agencies 267 

Default  of  its  Correspondent 268-287 


CHAPTER  XVIII.     General  Deposit 288-295 

Relation  of  Bank  and  Depositor 289 

Insolvency 289 

Forged  Paper  or  Base  Coin 289 

Bills  of  Insolvent  Bank 289 

Checks  on  the  Depositary 289 

Checks  on  other  Banks,  Bills,  Notes,  &c 289 

"Writings  in  the  Course  of  Banking  Business   ....  290-295 

Right  to  Inspect  Books 294 

Depositor's  Rights 294 

Right  of  others 294 

Use  of  Bank  Books  as  Evidence 295 


CHAPTER  XIX.    Certificates  of  Deposit 296-309 

Form   .     .     .     . 297 

Signature 299 

Nature  and  Effect 298 

Negotiability 299 

Transfer 300 

Statute  of  Limitations 301 

Staleness 302 

Payment  by 304,  305 

Lost  Certificate 300 


CONTENTS.  IX 

Sect. 

Interest  on  Certificate 307 

Alternate  Certificate 308 

Interest  Accounts 309 


CHAPTER   XX.    Payment  of  Deposit 310-361 

Duty  of  Bank 310 

Void  Paper 316 

Succession  of  Banks 320 


CHAPTER  XXI.     Statute  of  Limitations  on  General 

Deposit 321,322 


CHAPTER  XXII.     Lien  and  Set-off 323-340 

Comparison  of  Lien  and  Set-off  (p.  552) 323 

Lien, 

Particular 323 

General 323 

On  what  and  for  what  the  Lien  attaches   ....  324 

Effect 326 

Appropriation  of  Deposits 327 

Unmatured  Debt 329 

Loss  of  Lien 330 

Estoppel 331 

Creation 332 

Set-off 334 

Insolvency 337 

Of  Depositor 337 

Of  a  Commercial  Bank 338 

Of  a  Savings  Bank 339 

Death  of  Depositor 340 


CHAPTER  XXIH.     Adverse  Claim 341-344 

CHAPTER  XXIV.     Attachment  and  Injunction      .     .      346-348 


CHAPTER   XXV.     The  Clearing-House 348-355 

The  Routine 349 

Effect  of  Rules  on 350 

Third  Parties 350 

Members 352 

Notes  sent  through  the  Clearing 353 


X  CONTENTS. 

Sect. 
CHAPTER  XXVr.     Overdrafts 30G-3GO 


CHECKS. 

CHAPTER   XXVir.     CiiF.CKS  IN  Gkxkrai 3G2-395  A 

Definition 362 

Contrast  with  Bills 3G2 

Essentials 3G3-376 

Memorandum  Checks 388 

Antedated  and  Post-dated 389 

Issue 390 

Indorsement ...  391 

Checks  payable  to  Bearer 393 

Money  given  to  the  Drawer  of  a  Worthless  Check     .     .  394 

Transfer  of  Check  by  Mail 395 

Lost  Checks 395  A 


CHAPTER  XXVIII.    Revocation  of  Checks    ....  39G-400  A 

By  Countermand 397 

By  Death 400 

By  Insolvency 400  A 


CHAPTER  XXIX.     Statute  of  Limitations     ....       401,402 


CHAPTER  XXX.     Acceptance  ani>  Certification  .     .  403-419 

Form 405-411 

Authority 413 

Object 414 

Effect 

After  Issue 414 

Before  Issue 415 

Statute  of  Limitations 418 

Mistake 419 


CHAPTER   XXXI.     Presentment  for  Payment    .     .     .  420-428 

Period  of  Presentment 421 

Special  Circumstances 421-424 

IToldfr  V.  Drawer 421-426 

Holder  r.  Indorser 421,422 

Presentment  by  INIail 427 

Notice  of  Dishonor 428 


CONTENTS.  XI 

Sect. 

CHAPTER  XXXIl.    Payment  of  Checks 430-460  A 

Duty  of  Bank 430 

Signature 432-440  A 

Agent's ^^'^ 

IMarvied  Woman 434 

Joint 435 

Joint  and  Several 435 

Co-Trustees 436 

Assignees ^^' 

Co-Executors 438 

Firm 439 

Corporation '^'^^ 

Successors  in  Office  ..........  440  A 

Suspicious  Circumstances 441-445 

Insufficient  Funds 446,  449 

Legal  Tender 447, 448 

Recalling  Payments 449 

Order  of  Payment •     •  450 

Payment  by  giving  Credit 451 

Payment  after  the  Bank  is  Insolvent 452 

Payment  by  Mistake 454 

Drawer's  Suit  for  Dishonor 458 

Defences 459 

Possession  of  Paid  Checks 460 

Payment  of  Checks  on  other  Banks 460  A 

CHAPTER  XXXIII.     Forgery  of  Checks 461-489 

Principles 4t)l 

As  between  Bank  and  Drawer. 

Forged  Signature -  463-473 

Forged  Indorsement 474 

Fraudulent  Alteration 469,  480 

As  between  Bank  and  True  Owner 474 

As  between  Bank  and  Person  receiving  the  Money  .     463,  466-489 
Time  within  which  Discovery  and  Notice  must  be  Con- 
summated           •     •     •  487-489 

CHAPTER  XXXIV.     Effect  of  a  Check 490-555 

As  Evidence 490 

As  an  Assignment, 

Between  the  Bank  and  the  Holder 490 

Between  one  Holder  and  Another 497 

Between  the  Holder  and  the  Creditors  of  the  Drawee 

Bank .     .     •  498 

Between  the  Holder  and  the  Drawer  and  his  Cred- 
itors        539-541 

Conflict  of  Laws 542 


CONTENTS. 


As  Payment     ...... 

As  a  Gift 

Donatio  Causa  Mortis 
Inter  Vivos    

As  a  Testamentary  Document 


Shot. 
543 
548 
550 
551 
554 


CII.VPTER     XXXV.        P.W.MKNT     OF     XOTES    AND     ACCEPT- 
ANCES         

Duty  to  Pay 

Note  held  by  Bank 

lviij:hts  of  ludorsers 


556-564 

557,  558 

559,  560 

562 


CHAPTER  XXXVI.     Title  to  Deposits 565-606 

As  between  the  Bank  and  Depositor   .......  5G0-589 

As   between   Pai-ties,    neither   of   which    is    the    Bank 

(p.  900) 589 

As  between  the  Bank  and  Third  Persons 590-603 


CHAPTER   XXXVII.     Title  by  Gift 607-615 

Inter  Vivos 608-610 

Donatio  Causa  Mortis 611,612 


CHAPTER   XXXVIII.     Savings  Banks 616-620 

Nature 617 

Rules "620 

Pass-book 619,620 


CHAPTER   XXXIX.     Insolvency 

Definition 

Preferences  

Rifjhts  of  Depositors      .     .     . 
Insolvency  of  Savings  Banks  . 


621-632 

622 

623-627 

628-631 

632 


BILLS    AND    STOCK. 

CHAPTER   XL.     Bank  Bills 633-666 

Issue 634,666 

Bill-holder's  Rights 637-658 

Transfer 659-662 

Forged  Bills 659 

Warranty  of  Solvency 


662 


CONTENTS.  XUl 

Sect. 

CHAPTER  XLI.     Stock  and  Stockholders 667-720 

Liabilities  of  Stockliolders, 

As  Subscribers 668-674 

Beyond  Subscription 675-696 

Lien  of  a  Bank  on  its  Stock 697-705 

Shareholder's  Rights 700-717 

Transfer  of  Stock 709-714 

The  Bank  as  a  Shareholder 716 

Sovereign  States  as  Shareholders 718 


CHAPTER  XLII.    Infohmality,  Ultra  Virks,  and  For- 
feiture        722-764 


CHAPTER  XLIIL     Legislative    Continuance    of  the 

Corporation ''^^ 


CHAPTER   XLIV.    Dissolution 76i3 


PART   II. 

NATIONAL   BANKING   LAWS. 

National  Banking  Act,  June  5,  1864 1-63 

Act  of  31  May,  1878 64 

Act  of  14  February,  1880 •     •  ^5 

Act  of  26  February,  1881 66 

Act  of  12  July,  1882 67-79 

Act  of  3  March,  1883 ^^ 

Act  of  1  May,  1886 •     •  ^^ 

Acts  of  3  March,  1887 8-'  83 

Full  Text  of  the  Laws  of  the  United  States  relating  to  Bank- 
ing, passed  in  1874,  1875,  and  1876 84 

Cases  upon  their  Construction •  100-200 


TABLE   OF   CASES. 


[All  references  are  to  Sections,  throughout  the  book.] 


A. 

Abbers  v.  Commercial  Bank     ....     85  Mo.  173 398 

Abbott  V.  Ai^ricultural  Bank    ....     11  Sm.  &  Mar.  405 642 

V.  Smith 4  Ind.  452 275 


Abeles  v.  Cocliran        22  Ivans.  405 128,  n.  21 

Abrahams  v.  Southwestern  U.  R.  Bank  1  Rich.  S.  C.  n.  s.  441      .     .      638,  663 

Abrams  v.  Union  National  Bank       .     .     31  La.  An.  61 481 

Adams  v.  Daunis 29  La.  An.  315       II.  157 

V.  Darby 28  Mo.  162 421 

V.  Mayor,  &c.  of  Nasliville     .     .  16  Alb.  Law  Jour.  416     .     .     II.  141  c 

V.  Nashville 95  U.  S.  19  IL  141  y 

V.  Orange  Co.  Bank       ....     17  Wend.  514 322 

V.  Otterback 12  How.  U.  S.  539  .     .     .     9,  n.  5,  231 

V.  Railroad 6  H.  &  N.  404,  Eng.  Ex.  1800  .     .       46 

V.  Robinson 1  Pick.  461 496 

Adley  i'.  Wiiite  Stable  Co 17  Ves.  323 43 

^tna  Ins.  Co.  v.  Alton  City  Bank    .     .     25  111.  243 236,  274,  287 

^tna  Nat.  Bank  c  Fourth  Nat.  Bank  .  40  N.  Y.  82         186,  289,  493,  511,  524, 

557,  568 

Agar  V.  Atlantic  Ins.  Co 3  C.  B.  n.  s.  725     ....      98,  n.  32 

Agnew  V.  Bank  of  Gettysburg      ...     2  Har.  &  Gill,  478 14 

Agricultural  Bank  v.  Burr 23  Me.  256 669,  672 

V.  Commercial  Bank     ....  7  Sm.  &  Mar.  592  .     .     .  265,  274,  285 

V.  Robinson 24  Me.  274 761 

Albany  City  National  Bank  v.  Maher  .  19  Blatchf.  175       ....     II.  141  x 

Albert  v.  Savings  Bank 2  Md.  100 125 

Alderson  v.  Pope 1  Camp.  404 131 

Aldrich  v.  Dunham 16  111.  403 309 

V.  Jackson 5  R.  I.  218 477,  662 

Alexander  v.  Burchfield 7  M.  &  G.  1061       .     231,  2.38,  243,  245, 

380,  421,  n.  9 


V.  Mackenzie 0  C.  B.  766 98,  n.  15 

Alexandria  Canal  Co.  v.  Swann    ...  5  How.  83 143 

Allaire  v.  Hartshorne 1  Zab.  665 565,  n.  16 

Allen  V.  American  National  Bank     .     .  3  Laws.  517 511 

v.  Dundas 3  T.  R.  125 438 


XVi  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Allen  V.  First  National  Bank  ....  23  Oliio  St.  97  .     750,  II.  128,  129,  144 

i\  Freedinan's  Sav.  &  Trust  Co.  14  Fla.  418 755 

V.  Keeves 1  East,  4:55 389 

V.  Kramer 2  Brad.  20!) 421 

(.•.  Merchants'  Bank       ....  22  Wend.  215     .      102.  n.  19,  224,  250, 

205,  270,  272,  274,  278 

r.  Suvdani 20  Wend.  321 252' 

r.  Wiiliainsburs  Savings  Bank  .  09N.  Y.  314 G20 


Alley  V.  Rogers       10  Gratt.  306 216 

Alliance  Bank  r.  Kearsly 0  L.  R.  C.  P.  433 439 

Allinson  I',  llubbell 17  Ind.  559     .     .     .     .45,726,744,750 

Allison  c.  Farmer's  Bank 0  Rand.  204 22,  25,  42 

American  Bank  y.  Adanis 12  Pick.  3U3 22,24,42 

1-.  Wall 56  Me.  167 637,  G41 

American  Express  Co.  v.  Ilaire    ...  21  Ind.  4 265,  272 

American  Ins.  Co.  v.  Oakley    ....  9  Paige,  496       143, 159 

Amer.  Nat.  Bank  of  Detroit  I'.  Bushley  45  Mich.  135 472 

Ames  V.  Meriam 98  Mass.  294 441, 442 

V.  York  National  Bank      ...  103  Mass.  32G 395 

Amherst  Bank  i".  Root 2  Met.  522     .     .      IG,  20,  21,  27,  37,  42 

Amicable  Ins.  Co.  v.  Sedgwick     ...  10  Mass.  163 31 

Amis  V.  Witt       33  Beav.  619 550 

Ancona  v.  Marks 7  Hurl.  &  N.  686    .     .     .     .      494,  529 

Amlerson  v.  De  Soer 6  Gratt.  364 496 

Anderson  ;•.  State 65  Ala.  553 289 

V.  Thompson 38  Hun,  394 610 

V.  Thornton 3  Q.  B.  271 30 

Anderson,    lleceiver,    v.    Philadelpliia 

Wareliouse  Co IIIU.  S.  479 684 

Anderton  v.  Shoup 17  Ohio  St.  125 433 

Andover  Bank  v.  Grafton 7  N.  II.  298 665 

Andrews  r.  Blackley 11  Oliio  St.  89 381 

V.  Bond 13  Peters,  G5 542 

r.  German  National  Bank      .     .  9  Heisk.  211       41G 

V.  Kneeland 6  Cow.  354 98,  n.  30 

)■.  Pre.'iident,&c.  of  Suffolk  Bank  12  Gray,  461 102,  n.  22 

Angle  V.  N.  W.,  &c.  Ins.  Co 92  U.  S.  342 565,  n.  17 

Anglo-California  Bank  v.  Ames   ...  27  Fed.  Rep.  727 392 

Anketel  i;.  Converse 17  Ohio  St.  11 109,134 

Appeal  of  Bank  of  Commerce      ...  44  Pa.  St.  423 325 

Ai)i)eal  of  Farniers  &  Mechanics' Bank  48  Pa.  St.  57 561 

Ajipleby  v.  Erie  Co.  Savings  Bank  .     .  62  N.  Y.  12 C20 

Archer  r.  Bokenham 11  Modern,  IGl 9,  n.  7 

Arlington  r.  Merrick 2  Saunders,  414 27 

Armat  y.  Union  Bank 2N.  &M.471 650 

Armour  )'.  McMichael 36  N.  J.  L.  92 600 

Arms  V.  Conant 36  Vt.  745 46 

Armstrong  v.  Gibson 31  Wise.  61 49 

V.  Temperon 24  Law.  T.  n.  s.  275 610 

Armsworth  v.  Scotten 29  Ind.  495 637 

Arnohl  V.  Lyman 17  Mass.  400 499 

(;.  Macungie  Savings  Bank    .     .  71  I'a.  287 342 

V.  Niess 36  Leg.  Int.  437 838 


TABLE   OF   CASES.  XVll 

[All  references  are  to  Sections.] 

Arnold  i-.  Suffolk  Bank 27  Barb.  424 698 

Artliur  V.  Coin.  &  U.  K.  Bank  ....     9  Sni.  &  Mar.  480 672 

Ashbrook  v.  Kyan       2  Bush,  228 615 

Aspinwall  y.  Torrance 1  Lans.  381 128,  n.  22 

Atchafalaya  Bank  v.  Dawson       .     .         13  La.  495 760 

Atkin  ('.  Barswick .     1  Strange,  165 589 

Atkins  V.  Cobb 56  Ga.  86 593 

Atkinson  v.  Brooks 26  Vt.  574      ....      565,  n.  16,  600 

Atlantic  Bank  v.  Merchants'  Bank   .     .  10  Gray,  532      .     .  80,  89, 103, 413,  590 

Atlantic  National  Bank  v.  Franklin      .     55  N.  Y.  238 565,  n.  15 

V.  Harris 118  xMass.  147    ..     .    83,  147,  XL  144 

Atlantic  State  Bank  v.  Savery     ...     18  Hun,  36 72, 136 

Atlas  Bank  v.  Brownell 9  K.  I.  168 33 

Attorney-General  v.  Bank  of  Niagara  .     1  Hopk.  354 13,  760 

y.  Utica  Ins.  Co 2  Johns.  Ch.  .371 13 

V.  Wilson 1  Craig  &  Ph.  1 128 

Atwood  V.  Bank  of  Chillicothe      ...     10  Ohio,  526 645 

V.  Rhode  Island  Agricult.  Bank     1  R.  I.  376 693,  694,  696 

Aubert  v.  Walsh 4  Taunt.  293      ....    391,  393,  552 

Augusta  Bank  I'.  Hamblet 35  Me.  491 144,  n.  24 

Aurora  v.  West 22  Ind.  88 565 

Austin  y.  Aldermen 7  Wall.  694 11.141./;/ 

y.  Board  of  Aldermen  of  Boston     14  Allen,  359 IL  141  « 

V.  Daniels 4  Den.  299 172 

V.  Miller 5  McLean,  154       10 

Aymar  v.  Beers 7  Conn.  705 422 

Ayrault  v.  Pacific  Bank 47  N.  Y.  570      .     .      249,  250,  265,  272 

Ayres  v.  Farmers  &  Merchants'  Bank  .     79  Mo.  421 573 


B. 

Babcock  v.  Benham 4  Hill,  129 233 

Backliouse  v.  Charlton 8  Ch.  D.  444 317,  439 

Bacon  ;-•.  Brown       3  Bibb,  35 103 

V.  Robertson 18  How.  U.  S.  480 706 

Badger  v.  Bank  of  Cumberland    ...    26  Me.  428 159, 171 

Bagley  v.  Robertson 57  Ga.  145 295 

Bailey  v.  Bacon 26  Miss.  455 637 

V.  Bodenham 12  W.  R.  865     .     .     .     .    231, 427, 428 

V.  Bunker 2  Hill,  190 696 

y.  Burgess 5  Ohio  St.  15 494,534 

V.  Sawyer 9  Leg.  News,  191,  Thomp.  Nat. 

Bank  Cas.  356    .     .    IL  112  b,  150  d 

V.  Taber 5  Mass.  286        565 

Bain  v.  Brown 56  N.  Y.  285 125 

Baird  y.  Bank  of  Washington       .     .     .  11  Serg.  &  R.  411    .48,98,119,125,127 

Baker  v.  Atlas  Bank 9  Met.  182 677,  678,  693 

y.  Moody 1  Ala.  315 346 

r.  New  York  Nat.  Exch.  Bank  .     100  N.  Y.  31 326 

y.  State 54  Wise.  368 178 

Balbach  r.  Frelinghuysen 15  Fed.  Rep.  675   ..     .    573,  586,  589 

AOL.    I.  b 


XVlll  TABLE   OF    CASES. 

[All  references  are  to  Sections.] 

Balcb  i:  Wilson 25  Minn.  299 II.  152 

Baldwin  r.  Hank  u£  Louisiana      .     .     .  1  La.  An.  13       .     102,  n.  15  &  17,  236, 

2()5,  274,  287 

c.  Bank  of  Newbury      ....  1  Wall.  234    .     .     .      152,157,170,171 

V.  Canfic'ld 2G  Minn.  43 IL  128 

V.  Proctor 82  Ind.  370 137 

Ballard  v.  Fuller 32  Barb.  G8 358 

Ballour.  Boland 14  Hun,  355       ....   495,511,541 

Ballston  Spa  Bank  c.  IMarine  Bank  .     .  10  Wise.  120      ....    100,171,  6G6 

Baltimore  i^.  Wrightstown 63  Md.  81 308 

Bandel  v.  Isaac 13  Ud.  202 750 

Bank  v.  Bailey        12  Blatclif.  480 II.  140 

I'.  Baxter 31  Vt.  101      ......      419,  464 

V.  Butler 41  Ohio  St.  619      ....      215,  205 

V.  Chambers 11  Rich.  057 600 

V.  Clapp 76  N.  C.  482 317 

V.  Klniore 7  Rep.  110  (Iowa) 755 

V.  Kennedy 17  Wall.  22 II.  150  a. 

r.  Lanier 11  Wall.  369      .    .     .709,711,11112 

V.  Merchants'  National  Bank     .     91  N.  Y.  100 322 

V.  Ober 31  Kans.  599 265,  274 

V.  Pettel 41  111.  492 407 

V.  Pinson 58  Miss.  421 698 

• V.  Russell 2  Dill.  215 248 

V.  Western  Union  Tel.  Co.    .     .     52  Cal.  280 457 

Bank  Commissioners  v.  Bank  of  Brest  Harr.  Ch.  (Mich.)  106        120,  761,  n.  12 

V.  Bank  of  Buffalo 6  Paige,  497      117, 125, 126, 128,  n.  11, 

761,  n.  11 

V.  Lafayette  Bank 4  Edw.  Ch.  287 645 

V.  Rhode  Island  Central  Bank  .     5  R.  I.  12 761,  n.  13 


V.  St.  Lawrence  Bank  ....     3  Seld.  513 51,  149,  298 

Bank  of  America  v.  McNeil      ....     10  Bush,  54 714 

Bank  of  Attica  v.  Manuf.  &  Traders' 

Bank 20  N.  Y.  501 698 

Bank  of  Augusta  v.  Earle 13  Pet.  519 46,  63 

Bank  of  Australasia  i'.  Breillat    ...  6  Moore  P.  C.  173      ....   47, 127 

Bank  of  Bengali'.  Radakissen  Mitter  .     4  Moore  P.  C.  140 502 

Bank  of  Bethel  v.  Pahquioque  Bank     .  14  Wall.  383       .     .     II.  146,  150  a,  167 

Bank  of  Brighton  v.  Smith       ....     5  Allen,  413       19 

Bank  of  British  N.  America  v.  Hooper    5  Pick.  567 365 

r.  Merchants'  National  Bank     .     91  N.  Y.  106 344 

Bank  of  Carlyle  u.  Hopkins     ....     1  Monr.  245 19 

Bank  of  Charlotte  v.  Hart 07  N.  C.  264 637 

Bank    of    Chattanooga    v.    Bank    of 

Memphis 9  Heisk.  408 749 

Bank  of  Chillicothe  v.  Dodge  ....     8  Barb.  233 51,  298 

V.  Swayne 8  Ohio,  257 746 

Bank  of  Columbia  v.  Fitzhugh      ...     7  Cranch,  299 220 

V.  Lawrence 1  Pet.  578 233 

V.  Magruder 0  Ilar.  &  J.  172  .     .       9,  n.  19,  220,  229 

V.  Patterson's  Adm'r    ....     7  Cranch,  299 89,  205 

Bank  of  Commerce  v.  Bogy     ....     44  Mo.  15 499 

V.  Union  Bank 3  N.  Y.  230 463,  466,  480 


TABLE   OF   CASES.  xix 

[All  references  are  to  Sections.] 

Bank  of  Commonwealth  of  Ky.f.Wister    2  Pet.  318 312,653,718 

Bank  of  Delaware  Co.  I'.  Broomhall      .     38  Pa.  St.  135 226,255 

Bank  of  England  v.  Anderson       ...     4  Scott,  50 408 

Bank  of  Genesee  v.  Patciiin  Bank    .     .     3  Kern.  309        .      14  a,  98,  n.  34,  154, 

158,  745 

Bank  of  Georgia  v.  Harrison    .     .     .     .     G6  Ga.  096 720 

Bank  of  Greensboro  v.  Clapp   .     .     .     .     70  N.  C.  482 421,  n.  18 

Bank  of  Ireland  v.  Trustees     ....     5  II.  L.  C.  410 480 

Bank  of  Kentucky  v.  Adams   Express 

Company  93  U.  S.  174 275 

V.  Hickey 4  Litt.  225 044 

V.  Schuylkill  Bank 1  Pars.  Sel.  Cas.  230       .     .     .  122, 127 

V.  Thornsberry 3  B.  Mon.  519 645 

Bank  of  Leavenworth  y.  Hunt     .     .     .     11  Wall.  391 II.  108  e 

Bank  of  Louisville  v.  Bank  of  Newark      7  Cliic.  Leg.  News,  70    .     .     .    II.  112 

?;.  First  Nat.  Bank  of  Knoxville     8  Baxter,  101 265,274 

V.  Summers 14  B.  Monr.  306 648 

Bank  of  Marietta  17.  Pindall      ....     2  Rand.  465 46,  n.  13 

Bank  of  Metropolis  v.  First  Nat.  Bank      22  Blatchf.  58 326,  593 

V.  Jones 8  Pet.  12 167 

V.  New  England  Bank       ...     1  How.  234 332,  591 

Bank  of  Middlebnry  I'.  Bingham       .     .     33  Vt.  621 750 

V.  Rutland  &  Wash.  R.  R.  Co.    .     30  Vt.  1-59 124 

Bank  of  Missouri  v.  Benoist     ....     10  Mo.  519 322 

Bank  of  Mobile  v.  Brunn     .....     42  Ala.  108 374 

V.  Huggins 3  Ala.  n.  s.  206       ....       232,  265 

V.  Meagher 33  Ala.  622 648 

Bank  of  Monroe  f.  Field 2  Hill,  445 103,167 

Bank  of  New  Hanover  v.  Keenan     .     .     76  N.  Car.  340 240,  252 

Bank  of  New  London  v.  Ketchum     .     .    64  Wise.  7 101 

Bank  of  Niagara  ;'.  Johnson     ....     8  Wend.  645 129 

V.  McCracken 18  Johns.  495 644 

Bank  of  Northern  Liberties  v.  Cresson      12  Serg.  &  R.  306 17, 19 

V.  Jones 42  Pa.  St.  536 289,  508 

Bank  of  Orleans  y.  Merrill 2  Hill,  295 51,298 

■ V.Smith       3  Hill,  560 249,250 

Bank  of  Pennsylvania  y.  Farnsworth  .     18  111.563 51,298,299 

V.  Reed 1  Watts  &  S.  101   .     .     .    159, 165, 171 

Bank  of  Pittsburg  v.  Neal 22  How.  96 565 

V.  Whitehead 10  Watts,  397 133, 134 

Bank  of  Poughkeepsie  v.  Ibbotson    .     .     24  Wend.  473 693 

Bank  of  Republic  v.  Carrington  ...     5  R.  I.  515 600 

Bank  of  Rochester  v.  Jones     ....    4  Comst.  497 599 

Bank  of  St.  Albans  v.  Farmers'  Bank  .     10  Vt.  141 462,  463,  488 

Bank  of  St.  Mary's  v.  Calder  ....     3  Strobh.  Law,  408    ...     .   37,  357 

V.  St.  John       25  Ala.  n.  s.  566    .     128,  651,  670,  687 

Bank  of  State  of  N.  Y.  v.  Muskingum 

Branch  of  Bank  of  State  of  Oliio  .     .     29  N.  Y.  632      .....      158,391 

Bank  of  the  State  v.  Burton    ....     27  Ind.  426 198 

V.  Comegys 12  Ala.  772 172 

Bank  of  U.  States  v.  Bank  of  Georgia       9  Wheat.  907, 10  Wheat.  333    167, 171, 

289,  463,  480,  637,  660,  718 
V.  Carneal 2  Pet.  543 230,  563 


XX  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Bank  of  United  States  !••  Dandridge     .     12  Wheat.  G4 98 

r.  Davis 2  Hill,  451   49,52,108,112,134,156,232 

r.  Dunn (5  Pet.  51 117,167 

,-.  Goddard 5  Mason,  3GG 232 

r.  Macalester 9  Pa.  St.  475     ....    324,  343,  360 

V.  Owens 2  Pet.  538 747 

i-.  Sill 5  Conn.  106  .     .     0,  n.  9,  649,  650,  651 

V.Stearns 15  Wend.  314     .     .       14rt,  113, 180A 

V.  Waggoner 9  Pet.  399 750 

Bank  of  Utica  v.  City  of  Utica     ...    4  Paige,  399 GQ 

V.  Maglier 18  Johns.  341 14,  158 

V.  Smalley 2  Cow.  770 699,  713 

V.  Smedes 3  Cow.  684 40 

V.  Smith 18  Johns.  230     .     .     .     .    9  E,  9,  n.  19 

Bank  of  Vergennes  r.  Warren      .     .     .  7  Hill,  91  .     .     .     .      98,159,105,171 

V.  Ward 6  Munf.  166 650 

Bank  of  Washington  v.  Barrington  .     .     2  Pa.  27 27,  37,  42 

V.  Triplett 1  Pet.  25   .  9,  n.  21,  221,  232,  252,  274, 

281,  599 

Bank  of  Washtenaw  r.  IMontgomery     .     2  Scam.  428 46 

Bank  of  Wilmington  &  Brandy  wine  v. 

Wollaston 8  Harr.  90 32,  35 

Bank  of  Wooster  r.  Stevens     ....     1  Ohio  St.  233 746 

Banks  v.  Dardcn 30  G a.  580 „'    3^^ 

V.  Poiliaux 3  Rand.  136 74,  763 

Barber  v.  Gingell 3  Esp.  60 440,  463,  468 

Barbour  v.  National  Exchange  Bank     .  12  N.  E.  5  (Oiiio)    .     .       11.  130,  n.  59 

Barclay  i-.  Lucas 3  Dougl.  321 29 

Barke  v.  Bishop 27  La.  An.  465 400 

Barker  v.  Bradley 42  N.  Y.  316 499 

„  Frye 75  Me.  29 610 

;;.  Parker 1  T.  K.  295 27,  29 

Barnard  r.  Kellogg 10  Wall.  383 9,  n.  9 

Barnes  v.  Ontario  Bank 19  N.  Y.  152             9,  n.  1,  61,  63,  70, 

98,n.  36,  70,155, 160, 171, 
297,  298,  414,  n.  14,  743 

V.Ringgold 80Ky.  289 217 

Barnet  v.  Second  Nat.   Bank  of  Cin- 
cinnati 98  U.  S.  555        IL  130  k 

V.  Smith 10  Foster,  N.  11.  256 408 

Barnett  v.  Brandao 12  CI.  &  E.  787, 

6  M.  &  G.  030    .     .     .     .      325,  326 

Barney  v.  Newcomb 9  Cush.  46 170 

Barough  v.  White 4  Barn.  &  Cr.  325 442 

Barrick  v.  Austin 21  Barb.  241 158 

Barrington  r.  Bank  of  Washington  .     .     14  Serg.  &  R.  405 24,  25 

v.  W^arden 12  Cal.  311 499 

Barter  V.  Commonwealth 3  Penn.  &  W.  253 43 

Bartholomew  v.  Bentley 1  Ohio  St.  37 139 

V.Henley 3  Phil.  317 554 

Bartlett  v.  Hamilton 40  Me.  435 590 

V  Isbell 31  Conn.  296 255 

V.  Remington 69  N.  H.  364 610 


TABLE   OP   CASES.  XXI 

[All  references  are  to  Sections.] 

Bass  V.  Cline 4  Maule  &  S.  13 463 

Bassett  v.  Lederer 1  Ilun,  274 9 

Batclielor  v.  Planters'  National  Bank  of 

Louisville 78  Ky.  435 38,  172 

Bates  V.  State  Bank 2  Ala.  451 750 

Baxendale  o.  Bennet 3  Q.  B.  D.  525 658 

Baxter  v.  Ellis 57  Me.  180 505 

Bay  V.  Coddington 5  Johns.  Ch.  54 652 

Bayard  v.  Shunk 1  Watts  &  S.  92 602 

Beale  v.  Parrish 20  N.  Y.  407 252 

Beals  c.  Ohnstead 24  Vt.  115 103 

Bean  v.  Briggs 1  Iowa,  488 299 

Beard  v.  Kirk 11  N.  H.  397 100 

Beck  V.  Gillis 9  Barb.  35 606 

Beckwith  o.  Union  Bank 4  Sandf.  604 324,  329 

Bedell  v.  Hoffman 2  Paige,  199 342 

Bedford  Railroad  Co.  v.  Bowser  ...     48  Pa.  St.  29 127 

Beeching  v.  Gower 1  Holt,  313 421 

Beeman  ;;.  Duck 11  M.  &  W.  251 408 

Beers  v.  Maynard   .    _. 1  Bail.  Eq.  168 641 

v.  Phoenix  Glass  Co 14  Barb.  358 98,  n.27 

('.  Robinson 9  Pa.  St.  229 499 

Begbie  v.  Levy 1  C.  &  J.  180 368 

Belcher  v.  Wilcox 40  Ga.  396 687 

Belden  v.  Lamb 17  Conn.  44 255 

V.  Meeker 47  N.  Y.  307 625 

Belknap  y.  National  Bank  of  N.America     100  Mass.  376 480 

Bell  y.  Alexander 21  Graft.  1 423, 421,  n.  13 

('.  Dagg 60  N.  Y.  528 565 

V.  Hunt 3  Barb.  Ch.  391 342 

Bellamy  v.  Marjoribanks 8  Eng.  L.  &  Eq.  517     289,  480,  493,  568 

Bellasis  v.  Hester 1  Ld.  Rayra.  280 409 

Bellemire  v.  United  States  Bank  ...  1  Miles,  173,  4  Wliart.  105  .     236,  265, 

274,  283 

Bellmont  Branch  Bank  v.  Hoge   ...     35  N.  Y.  65 565 

Bellows  V.  Hallovvell  &  Augusta  Bank     2  Mason,  31 765 

Bellows  Falls  Bank «;.  Rutland  Co.  Bank  40  Vt.  377     .     .     .     298,299,-302,322 

Bensinger  v.  Wren 100  Pa.  St.  500 29 

Benson  v.  Heathorn 1  You.  &  C.  Ch.  326 125 

Berkshire  Woollen  Co.  v.  Proctor     .     .     7  Cush.  417 9,  n.  16 

Bernheimer  v.  Marshall 2  Minn.  78 463 

Bertles  v.  Numan 92  N.  Y.  152 604 

Bickerdike  v.  Bollman 1  Tenn.  405 421 

Bickford  v.  First  Nat.  Bank  of  Chicago  42  111.  238        414,  n.  14  &  15,  421,  432 

440,  451,  494,  530 

Bigelow,  Clerk,  &c.  v.  Bridge  ....     8  Mass.  275 27 

Billing  V.  Devaux 3  M.  &  G.  571 380 

Billings  (•.  Collins 44  Me.  271 565,  n.  14 

Bills  V.  National  Park  Bank     .     .     .     .  47  N.  Y.  Sup.  Ct.  .302      ....     417 

Binney's  Case 2  Bland,  Ch.  142 62,  721 

Birch  V.  Fisher 51  Mich.  39 302,  303 

Birchall  v.  Third  National  Bank  ...  15  Wk.  Notes  of  Cas.  174   ..     .     458 

Bird  V.  Lanius 7  Ind.  615 499 


XXll  TABLE   OP   CASES. 

[All  rcfereuces  are  to  Sections.] 

Bird  V.  Louisiana  State  Bank  ....    93  U.  S.  96 25.3 

Bird's  Executors  v.  Cochran     ....     2  Woods,  32 II.  157  c 

Birdsall  v.  Russell 29  N.  Y.  220 050 

Bishop  r.  Countess  of  Jersey    ....    2  Drew.  143 289,508 

Bissell  j;.  First  National  Bank  ....     69  Pa.  St.  415 46,  168 

V.  Michigan  Southern  11.  R.  Co.    22  X.  Y.  258 756 

Black  V.  Ottoman  Bank 10  W.  R.  871 33 

Blaffer  v.  Louisiana  National  Bank  .     .     35  La.  An.  251 352 

Blaine  v.  Bourne 11  K.  I.  119 326,  503 

Blair  w.  First  Nat.  Bank  of  Mansfield    .     2  Flippin,  111  U.  S 158 

V.  Wilson 28  Gratt.  165 544,  546 

Blake  v.  National  Banks 23  Wall.  307 II.  141  s 

Blanchard  f.  Milliard 11  Mass.  88 220 

V.  Stevens 3  Cush.  108 5G5,  n.  16 

Blasdel  v.  Locke 52  N.  H.  280 609,  610 

Bleaseby  r.  Crossley 3  Bing.  430 552 

Bletz  V.  Columbia  National  Bank      .     .     87  Pa.  St.  87 II.  130  m 

Blodgett  V.  Morrell 20  Vt.  509 009 

Blood  V.  Northrup 1  Kans.  28 299 

Bloodgood  I'.  Mohawk  Railroad  Co.      .     10  Wend.  9 102,  n.  10 

Bloomer  v.  Bloomer 2  Bradf.  339  (N.  Y.) Oil 

Blount  V.  Windley 68  N.  C.  2 637 

Blumenthalr.  Brainard 38  Vt.  410 109,134 

Boatman's   Savings    Inst.   v.   Rank   of 

Missouri 3  Mo.  497 646 

V.  Holland 38  Mo.  49 600 

Board  of  Commissioners  v.  Citizens'  Na- 
tional Bank  of  Faribault 23  Minn.  280 II.  141  a,  o 

V.  Elston 32  Ind.  27 II.  141 

Bobbett  V.  Pinkett 1  Ex.  D.  368 245 

Boddington  iJ,  Schleucker 1  Nev.  &  M.  540,  4  B.  &  Ad.  752      238, 

243,  421 

Bodenhara  v.  Hoskins 13  Eng.  L.  &  Eq.  222      ....     326 

r.  Purchas 3  Barn.  &  Aid.  39       .     .   289,  355,  568 

Boehm  i-.  Stirling 7  T.  R.  430 380,  443 

Bohanan  v.  I'ope 42  Me.  93 499 

Boi.<gerard  v.  New  York  Banking  Co.   .    2  Sandf.  Ch.  23 743 

Bolton  I'.  Puller 1  B.  &  P.  539 324 

V.  Richard 0  T.  R.  139 569 

Bonar  v.  Macdonald 3  H.  L.  Cas.  226 31 

Bond  V.  Bank  of  Georgia  ....    2  Kelly,  92 750 

V.  Farnham 5  Mass.  120 421,  n.  14 

Boom  V.  City  of  Utica 2  Barb.  104 89 

Boone  v.  Citizens'  Savings  Bank      .     .     84  N.  Y.  83 004 

Borie  v.  Commissioners  of  Fnyetteville     75  N.  C.  207 II.  141  s 

Borneman  t'.  Siddinger    .."....     15  Me.  429 608,611 

Borup  V.  Nininger 5  Minn.  523  .     .     .     9,  n.  10,  224,  255 

Boston  Bank  v.  Hodges 9  Pick.  420 9  a,  n.  19 

Boston  Hat  Manufactory  v.  Messinger    2  Pick.  223 27 

Bostwick  V.  Van  Voorhees 91  N.  Y.  353 20,  21,  36 

Boswell  V.  Smith 6  Car.  &  P.  60 552 

Bough  ton  V.  Flint 74  N.  Y.  476 302 

Bouts  V.  Ellis 17  Bcav.  121 549,  550 


TABLE   OF   CASES.  XXUl 

[All  references  are  to  Sections.] 

Bowdell  V.  Farmers  &  Mechanics'  Na- 
tional Bank  of  Baltimore      ....     14  Bank.  Mag.  387 680 

Bovvden  v.  Johnson 107  U.  S.  251 683 

V.  jNIorris 1  Hughes,  378 II.  150  d 

V.  Santos 1  Hughes,  158 II.  150  d 

Bowen  v.  Newell 6  Sandf.  326      ....   220,  381,  387 

Bowling  V.  Arthur 34  Miss.  41    .     .  236,  265,  266,  274,  285 

Bowman  v.  Cecil  Bank 3  Grant,  33 666 

V.  Van  Kuren 29  Wise.  220 565,  n.  15 

Boyce  i-.  Brockway 31  N.  Y.  490 248 

V.  Edwards 4  Pet.  Ill 408 

Boyd  V.  Emmerson 2  Ad.  &  E.  184 409,  572 

Boyer  I'.  Boyer 113  U.  S.  689     ...     .     II.  141  u',  ?/ 

Boyer's  Appeal       103  Pa.  St.  387       ...    II.  141,  n.  97 

Boylston  National  Bank  v.  Richardson .     101  Mass.  287 449 

Brabrook  v.  Boston  Five  Cents  Savings 

Bank 104  Mass.  228 610 

Bradford  y.  Fox 39  Barb.  203 453 

Bradford  Banking  Co.  v.  Briggs    .     .     .     31  Ch.  D.  19 699 

Bradley  i-.  Bank  of  the  State    ....     20  Ind.  528 750 

I'.  Delaplaine 5  Harring.  305 381,  383 

V.  Hunt 5  Gill  &  Johns.  58 637 

V.  Root 5  Paige,  632 511 

V.  The  People 4  Wall.  459 II.  141  t 

Bradstreet  v.  Everson 72  Pa.  St.  124 267,  285 

Bragg  V.  Meyer 1  McAll.  411 10 

Brahm  v.  Adkins 77  111.  263     .     .  186,  322,  567,  568,  574 

Branch  v.  Baker 63  Ga.  502 694 

V.  Dawson 33  Minn.  399 322 

V.  Roberts 60  Barb.  435 657 

V.  United  States 12  Bank.  Mag.  61 II.  145 

Branch  Bank  v.  Collins 7  Ala.  95 140 

y.  Knox lAla.  N.s.  148 232,265 

v.Foe 1  Ala.  396 159 

v.  Scott 7  Ala.  107 140 

V.  Steele 10  Ala.  915 162 

Brandao  v.  Barnett 12  CI.  &  F.  787 324,  325 

Brandon  r.  Scott 7  El.  &  Bl.  234 435 

Brandy  wine  Bank's  Assignment .     .     .  1  Chester  Co.  431  (Pa.)  .     .     .    .     6.30 

Bremer  Co.  Bank  v.  Moses      .     .      .     .     34  N.  W.  863 358 

Brent  v.  Bank  of  Washington  ....     10  Pet.  616 699 

Brewer  v.  Dyer 7  Cush.  340 499 

V.  Knapp 1  Pick.  332 562 

Bridenbecker  v.  Lowell 32  Barb.  9 158,  159 

Bridgeport  Bank  r.  Dyer 19  Conn.  136      ....    9,  n.  19,  9  A 

1-.  N.  York  &  N.  Haven  R.  R.  Co.     30  Conn.  231 709 

V.  Schuyler 34  N.  Y.  30 709 

Bridges  v.  Hawkesworth 16  Jur.  1079 654 

Bridgman  i-.  Gill 24  Beav.  302 322,  343 

Briggs  r.  Central  National  Bank  ...    89  N.  Y.  182 574 

U.Merrill 58  Barb.  .379 5G5,n.l4 

r.  Penniraan 6  Cow.  387 693 

Brind  v.  Hampshire 1  M.  &  W.  372 398 


Xxiv  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Brine  v.  Ferrier 7  Sim.  549 554 

BrinkerhofE  y.  Bostwick 28  Hun,  2o7  .     .     .    717,  II.  150  a,  153 

Briscoe  r.  Kentucky  Biink llPet.  2G7 51,604 

Bristol  I".  Barker 14  Jolins.  205 13 

Bristol  Bank  v.  Keavy 128  Mass.  298 159 

Bristol  Knife  Co.  i-.  First  Nat.  Bank  of 

Hartford 41  Conn.  421 457,  460  A 

British  &  American   Mortgage  Co.  v. 

Tibballs 6:3  Iowa,  468 .     .     .     .9,  n.  19,  47,  305 

Brittain  1-.  Bank  of  London      ....     11  W.  &  R.  569 467 

Britton  V.  NicoUs 104  U.  S.  757   102,  n.  16,  265,  n.  10,  n.  13 

Broadway  Bank  v.  McElrath   ....     2  Beas.  26 713 

Broderick  v.  Waltham  Savings  Bank   .     109  Mass.  149 610 

Bromley  r.  Brunton 6  L.  R.  Eq.  275 550 

I'.  Commercial  National  Bank    .     9  Phila.  522 446 

Brook  I'.  Hook L.  T.  R.  24  Exch.  34 464 

Brooklyn  City,  &c.  R.  R.  Co.  v.  National 

Bank  of  Republic 22  Alb.  Law  Jour.  189    ..     .  10,  758 

Brooks  V.  Bigelow 142  Mass.  6 574,  581 

Brouwer  v.  Appleby 1  Sandf.  158 144 

V.  Harbeck 9  N.  Y.  589 625 

Brown  v.  Adams 4  Ch.  App.  764 355 

r.  Brown 18  Conn.  410 608 

V.  Citizens'  National  Bank     .     .     38  Bank.  Mag.  135 306 

V.  Davies 3  T.  R.  80 443 

r.  Foster 4  Cush.  214 346 

V.  Hitchcock 36  Ohio,  667 682 

V.  Hull 33  Gratt.  23 217 

r.  Jackson 1  Wash.  Cir.  Ct.  512 693 

r.  Leckie 43  111.  497      .     .  336,  414,  451,  494,  530 

r.  Lusk 4  Yerger,  210 381,  538 

r.  McElroy 52  Ind.  404 302 

V.  Mott 7  Johns.  361 551 

V.  New  Bedford  Savings  Inst.    .     137  Mass.  262 325 

. 1-.  O'Brien 1  Rich.  268 499 

1-.  Second  National  Bank  of  Erie    72  Pa.  St.  209 11.130 

i:  Spofford 95  U.  S.  481 565 

r.  Winnisinimet  Co 11  Allen,  326 61 

Bruce  v.  Bruce 5  Taunt.  495 480 

V.  Buler 2  M.  &  R.  3 21 

Bruen  v.  Howe 2  Barb.  586 290 

Brummagin  v.  Tallent 29  Cal.  503 299,  302 

Brust  V.  Barrett 82  N.  Y.  400 402 

Bruyn  v.  Receiver 9  Cow.  413 338,  641 

Bryant  v.  Damariscotta  Bank  ....     18  Me.  240 644 

Bryden  r.  Brydcn 11  Johns.  187 443 

Buchlin  v.  Chaplin 1  Lans.  443 290 

Buckwalter  v.  United  States         ...  11  Serg.  &  R.  193  .     .     .     .     II.  130  m 

Buell  V.  Warner 33  Vt.  570 717 

Bufe  V.  Turner 6  Faunt.  338 21 

Buffalo  City  Bank  r.  Codd 25  N.  Y.  163 666 

Bull  V.  First  National  Bank      ....     123  U.  S.  105 374 

BuUard  i".  Bank 18  Wall.  589      ....      713,  IL  112 


TABLE   OF   CASES.  XXV 

[All  references  are  to  Sections.] 

BuIIard  v.  Bell 1  Mason,  243 640,  653 

V.  Randall 1  Gray,  605        40,  168,  289,  346,  370, 

412,  414,  451,  493,  568 

Bullett  i\  Bank  of  Pennsylvania  .     .     .     2  Wash.  C.  C.  172 650 

Bullock  y.  Boyd 2  Edw.  Ch.  293 290 

Bult  V.  Morrell 12  Ad.  &  El.  745 4J0 

Bundy  r.  Town  of  Monticello  ....     84  Ind.  119 320 

Bunn  y.  Markham 7  Taunt.  224 611 

V.  Winthrop 1  Johns.  Ch.  329 610 

Bunnell  r.  Collinsville  Savings  Society    38  Conn.  203 566,617 

Burdock  v.  Taylor 16  Pick.  335 12 

Burgess  v.  Northern  Bank  of  Kentucky    4  Bush,  COO 477 

Burk  V.  Bishop 27  La.  An.  465 400,  550 

Burke  v.  State 66  Ga.  157 298 

Burkhalter  v.  Second  National  Bank    .  42  N.  Y.  538       .     .    240,  247,  454,  544 

Burley  v.  Bowen MS 77 

Burn  v.  Carvalho 4  My.  &  Cr.  690 495,541 

Burnes  v.  Pennell 2  H.  L.  C.  497 132 

Burnham  v.  Webster 19  Me.  232 171,  232 

Burr  V.  Sickles 17  Ark.  428 395 

Burress  v.  Blair 61  Mo.  133 606 

Burridge  v.  Geauga  Bank Wright,  Ohio,  688  ......     648 

Burrill  v.  Dollar  Savings  Bank     ...  92  Pa.  St.  134       9,  n.  19,  566,  617,  620 

r.  Nahant 2  Met.  163 116 

V.  Smith 7  Pick.  291 487 

Burroughs  v.  Bank  of  Charlotte  ...     70  N.  C.  284       652 

V.  Lowder 8  Mass.  373 19 

Burrows  v.  Bangs 34  Mich.  304 304 

V.  Smith 10  N.  Y.  550 IL  106 

Burtnett  v.  First  National  Bank  ...    38  Mich.  630 326,  .590 

Burton  v.  Bridgeport  Savings  Bank      .     52  Conn.  398 614 

y.  Burley 12  Leg.  News,  178,9  Biss.  253    46,101, 

II.  108  <j 

V.  Payne 2  Car.  &  P.  520 460 

Bury  V.  Woods 17  Mo.  App.  245 592 

Bush  V.  Brown 49  Ind.  573 565 

Bushnell  v.  Cliautauqua  National  Bank     10  Hun,  .387 II.  108  c 

Bntterworth  v.  Peck 5  Bosw.  .341 493 

Butts  V.  Wood 38  Barb.  181 125 


c. 

Cabot  Bank  v.  Morton 4  Gray,  156 463,  659 

Cadle  V.  Baker 20  Wall.  650      ....     IL  101,  150 

V.Tracy 11  Blatchf.  101 IL  157 

Cahill  V.  Kalamazoo  Ins.  Co 2  Dougl.  Mich.  124    ...     .   43,  758 

Cake  V.  First  National  Bank  of  Lebanon  Thoms.  Nat.  Bank  Cas.  890    .    II.  1-30 

Caldwell  V.  Nat.  Mohawk  Valley  Bank  64 Barb.  333     52, 164, 16-5, 191, II.  108 b 

Calisher  v.  Forbes 41  L.  J.  Ch.  56 45 

Callender  v.  Dinsmore 55  N.  Y.  200,  208   .     .     .     0,  n.  9  &  10 

Camden  v.  Doremus 3  How.  515 9,  n.  19 


Xxvi  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Camidge  i;.  Allenby 6  B.  &  C.  373 425,  448 

Campbell  v.  Mississippi  Union  Bank     .     0  How.  G25 636 

Carap.'s  Appeal 30  Conn.  88 608 

Cane.  Read 3  Atk.  095 438,  440  B 

Canal  Bank  i;.  Bank  of  Albany    ...     1  Hill,  287     ..     .     474,  47G,  480,  489 
Canfield  v.  State  National  Bank  .     .     .     1  N.  W.  Kep.  173    ...     .     II.  108  a 
Cannonsbur<i   Iron   Co.   v.   Union   Na- 
tional Bank     34  ritts.  L.  J.  93 334 

Capitol  State  Bank  v.  Lane      ....     52  Miss.  G77 252 

Carew  v.  Duckworth 4  L.  R.  Exch.  313  .     .     .     .      380,  425 

Carey  v.  Greene 7  Ga.  79 048 

V.  McDougahl 7  Ga.  84 744 

Carman  v.  Franklin  Bank 01  Md.  407 440  A 

Carncross  v.  Lorimer 3  Macq.  830 472 

Carnegie  v.  Morrison 2  Met.  402 499 

Carolina  National  Bank  v.  Wallace  .     .     13  S.  C.  347 233 

Carpenter  v.  Butterfield  ......     3  Johns.  Cas.  145 640 

V.  Farnsworth 100  Mass.  561    ...     .   305,  432,  440 

V.  Northborough  National  Bank     123  Mass.  09 404 

r.  Northfield  Bank 39  Vt.  40 312,  447 

Carr  v.  Carr 1  Mer.  541 289,  568 

V.  National  Security  Bank    ...     107  Mass.  45  289,  407,  493,  499, 

520,  508 

Carradine  v.  Carradine 58  Miss.  286 608 

Carruthers  v.  West 11  Q.  B.  143 565 

Carson's  Adm.  v.  Phelps 40  Md.  73 610 

Carter  v.  riiiladelphia  Coal  Co.    .     .     .     77  Pa.  St.  286    .     .     .     .9,  n.  12,  n.  19 

r.  Whalley 1  B.  &  Ad.  11 131 

Casco  Bank  v.  Keene 53  INle.  103 478 

Case  e;.  Bank 100  U.  S.  446 XL  150 

J,.  Beauregard 1  Woods,  126 590 

y".  Berwin 22  La.  An.  321 II.  150 

V,  Burt  ..........     l-^  Mich.  82 409 

V.  Citizen  Bank  of  Louisiana     .     .     2  Woods,  23      ....     11146,152 

c.  Dennison 7  R.  I.  88 611,  612,  015 

..Hawkins 53  Ala.  702 143 

V.  Henderson 23  La.  An.  49 493,  618 

u.  Mechanics' Banking  Association    4  Comst.  16G 393 

„  Morris 31  Pa.  100,  104 421,  n.  14 

,;   Small 4  Woods,  78 II.  112  a 

y.  Terrell 11  Wall.  199.     .     .     .     .  IL  101,  150  a 

Casey  v.  Galli 94  U.  S.  073       14,  II.  112  b,  144, 150  d 

V.   La   Societe   de   Credit   Mo- 

bilier 2  Woods,  77.    .     .  IL  150  A,  150  c,  152 

Cassedy  v.  First  National  Bank    ...    30  Minn.  80 300,  302 

Cate  V.  Patterson 25  Mich.  191 51,  298 

Cawein  v.  Browinski 0  Cush.  457 421 

Cay  Co.  Bank  r.  Daniels 47  N.  Y.  031 599 

Cecil  Bank  v.  Farmers'  Bank  ....     22  Md.  148    ..     .     583,  591,  592,  598 

Cecil  Nat.  Bank  v.  Watsontown  Bank     105  U.  S.  217 701 

Central  Bank  v.  Davis 19  Pick.  373 9,  n.^17 

V.  Empire  Stone  Dressing  Co.     .    26  Barb.  23 757 

V.  Ilammett 50  N.  Y.  159 6G5 


TABLE   OP   CASES.  XXvii 

[All  references  arc  to  Sections.] 

Central  Georgia  Bank  v.  Cleveland  Nat. 

Bank 69  Ga.  6G7        224 

Central  Nat.  Bank  v.  Connecticut  Mu- 
tual Life  Ins.  Co 104  U.  S.  54     .     .     .     .     317,  326,  343 

V.  Levin 6  Mo.  App.  543 146 

?;.  North  River  Nat.  Bank      .     .     44  Hun,  115 477 

V.  Pratt 115  Mass.  539 130 

V.  Richland  Nat.  Bank      ...     52  How.  136 IL  157  a 

V.  Valentine 18  Hun,  417 599 

Central  R.  R.  Banking  Co.  v.  First  Nat. 

Bank  of  Lynchburg 73  Ga.  383 593 

Chaffee  v.  First  Nat.  Bank  of  Ravenna  40  Ohio  St,  10  .     .     .     .    494,  511,  534 

V.  Fort 2  Lans.  81 589 

Chambers  v.  Miller 13  C.  B.  n.  s.  125     .     .     .     .     449,  569 

r.  Union  Nat.  Bank      ....     78  Pa.  St.  205 489 

Champion  v.  Gordon        70  Pa.  St.  476      ...      373,  384,  389 

Chandler  v.  Monmouth  Bank       ...     1  Green,  255 140 

Chapman  v.  Beckington 3  Q.  B.  722 29 

V.  Hart 1  Ves.  Sr.  271 637,  654 

V.  Union  Bank 32  How.  Pr.  95 254 

V.  White 2  Seld.  412     .     54,  289,  380,  493,  568, 

574 

Charles  v.  Blackwell        1  Com.  P.  D.  548 475 

Charleston  v.  People's  Nat.  Bank      .     .  5  S.  C.  Rich.  L.  103     .      II.  113,  141  s 
Charlotte  Iron  Works  v.  American  Ex- 
change Nat.  Bank 34  Hun,  26      .     .     .   248,  5G5,  567,  599 

Charnley  v.  Dallas 8  Watts  &  S.  353 299 

Chase  v.  Petroleum  Bank 66  Pa.  169 188 

i;.  Redding       13  Gray,  418 549,  611 

Chatham  Nat.  Bank  v.  Merchants'  Nat. 

Bank      ...          4  Thomp.  &  C.  196      .     .    II.  106,  157 

Chattahooche  Nat.  Bank  v.  Schley  .      .     58  Ga.  369 196,  204 

Chautauqua  Bank  v.  Risley     ....     19  N.  Y.  369 48 

Check  V.  Merchants'  Nat.  Bank   ...  10  Heisk.  Tenn.  618     ..     .  II.  130  c? 

Chemical  Nat.  Bank  y.  Bailey      .     .     .  12  Blatchf.  480    .     .  289,  II.  146,  150  c 

V.  Kohner 58  How.  Pr.  R.  267 159 

Chesapeake  Bank  v.  First  Nat.  Bank 

of  Baltimore        40  Md.  269 K.  157  « 

V.  Swain 29  Md.  483 184,  295 

Chester  Glass  Co.  v.  Dewee     ....    16  Mass.  94 752 

Chew  V.  Ellingwood 86  Mo.  260 37,  38 

Chicago  Bank  v.  Farwell 10  Biss.  270 II.  141  u 

ChicasTO   Marine    &   Fire   Ins.    Co.   v. 

Carpenter 28  111.  360 312 

V.  Stanford 28  111.  168       178,  315,  494 

„. 25  111.21 530 

Chicopee  Bank  v.  Eager 9  Met.  584      .     .  9,  n.  9  &  19,  220,  233 

u.  Philadelphia  Bank    ....     8  Wall  641 230,252 

Child  V.  Hudson's  Bay  Co 2  P.  Wms.  207    ...     .     9,  n.  11,  43 

Chiles  V.  Garrison 32  Mo.  475 188 

Chouteau  v.  Rowse 56  Mo.  65 421 

Chowne  i-.  Baylis 31  Beav.  851 II.  42 

Christmas  v.  Russell 14  Wall.  69 493,  513 


XXviii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Church  V.  Farnhara 1  SheW.  393 421 

Citizens'  Bauk  v.  Bowen      .....     21  Kans.  354 334 

I'.  Carson 32  Mo.  191 557 

V.  GralHin 31  Md.  507 454 

V.  Howell '8  Md.  530 265,  274,  287 

Citizens' Nat.  Bank  y.  Brown  .     .     .     •     11  N.  E.  799  (Ohio)     .     .     .     299,306 

V.  Elliott 55  Iowa,  104 101 

i>.  Leming 8  Inter.  Rev.  Hec.  132      .     .    II.  130<i 

V.  Lofton 85  Ind.  341 II.  141  / 

Citizens'  Savings  Bank  v.  Blakesley     .    42  Ohio  St.  G45 89,  320 

City  Bank  v.  Cutter 3  Pick.  414      ...    9,  n.  19.  9  A,  220 

V.  First  Nat.  Bank 45  Tex.  203    ...     .      477,  479,  489 

r.  Perkins 29  N.  Y.  554 158,165 

1-.  Weiss 3  S.  W.  299  (Te.x.) 217 

City  Bank  of  Columbus  v.  Beach     .     .     1  Blatchf.  C.  C.  425     .     .     .     .   46,  63 

City  Bank  of  Macon  v.  Kent   ....     57  Ga.  283       471 

City  Nat.  Bank  v.  Burns 68  Ala.  267 569 

i;.  Paducah 5  Cent.  Law  Jour.  347      .    II.  141  a,  k 

V.  Stout 61  Tex.  567 483 

City   Nat.   Bank   of    Poughkeepsie   v. 

Phelps 86N.  Y.484 IL  144 

City  of  Carthage  y.  First  Nat.  Bank      .     10  Rep.  469 IL  141  o 

City  of  Elizabeth  i-.  Force 29  N.  J.  Eq.  591 050 

City  of  Richmond  t-.  Scott 48  Ind.  568 IL  141  c 

City  Savings  Bank  v.  Hopson  ....     53  Conn.  453 234 

Clafflin  V.  Bank .    25  N.  Y.  293 144,  n.  14 

Clafiin  v  Farmers  &  Citizens'  Bank       .     36  Barb.  540 155,  413 

j;.  Wilson 51  Iowa,  15 320 

Claghorn  v.  CuUen 13  Pa.  St.  133 6 

Clancarty  v.  Latouche 1  Ball  &  B.  420 309 

Claridge  r.  Hoare 14  Ves.  Jr.  59 42 

Clark  v.  Clark 108  Mass.  522 610 

V.  Desmoines 19  Iowa,  199 43 

V.  Hawkins 5  R.  I.  219 641 

r.  Merchants'  Bank      ....     2  N.  Y.  380 574 

V.  Metropolitan  Bank    ....     3  Duer,  241 702 

V.  National  Bank  of  City  of  New 

York 11  I^aly,  237 290 

J.  National  Metropolitan  Bank  .     2  MacArthur,  249  ...     .   421,  n.  19 

V.  School  District 3  R.  I.  199 64 

Stackhouse 2  Mart.  La.  319 442 


Clarke  v.  Man.  Ins.  Co 8  How.  235 21 

Clarke  Nat.  Bank  r.  Bank  of  Albion     .  52  Barb.  592      .     .      98,  n.  3,  155,  413 

Clayton's  Case 1  Mer.  608 355 

Cleveland  i-.  Burnham 55  Wise.  598,  64  Wise.  347  .     .     .    685 

Cleveland,  &c.  R.  R.  Co.  v.  Reary     .     .  3  Ohio  St.  201 102 

Clews  V.  Bank  of  New  York  National 

Banking  Association 105  N.  Y.  398     .     .     .    414,  n.  21,  482 

Clough  V.  Clough 117  Mass.  83 611 

Coatcs  V.  First  Nat.  Bank 91  N.  Y.  20 495 

V.Preston 105  111.470 440 

Coats  v.Donnell 94  N.  Y.  176 160,624 

Cobb..  Beeke 6  Q.  B.  930 185 


TABLE   OF   CASES.  XXIX 

[All  references  are  to  Sections.] 


Cocheco  Nat.  Bank  ?'.  Haskell 
Cochituate  Bank  v.  Colt  .  . 
Cocks  V.  Masterman    .     .     .     . 


Codd  V.  Kathbone 

Coddington  v.  Bay  .... 
Codman  r.  Lubbock  .... 
Cody  V.  City  Nat.  Bank  .  .  . 
Coffey  V.  Nat.  Bank  of  Missouri 
Coffin  r.  Henshaw 


51  N.  H.  116 158,  167,  169 

1  Gray,  382 055,  687 

1  B.  &  C.  902,  17  E.  Cr.  L.  R.     .    487, 
488,  558 

19  N.  Y.  37 13 

20  Johns.  637 599 

5  Dowl.  &  R.  289 637 

55  Mich.  379 595 

40  Mo.  140 11.  144 

lOInd.  277 313 


Coggill  V.  American  Exchange  Bank    .  1  N.  Y.  (Comst.)  113  .     .     .      370,  474 

476,  477,  480 
Cogswell   V.   Rockingham   Ten    Cents 

Savings  Bank 59  N.  H.  43 421,  617,  757 

Cohea  v.  Hunt 2  Sm.  &  Mar.  227     .     .     .     .   9  a,  n.  19 

Colien  V.  Hule 3  Q.  B.  D.  371 398 

Coite  V.  Soc.  for  Savings 32  Conn.  173 617 

Cole  V.  Ryan 52  Barb.  168       673,  674 

Coleman  r.  Parker 114  Mass.  30 611 

V.  White 14  Wise.  700 693 

Coles  V.  Bank  of  England 10  Ad.  &  El.  449 480 

Collier  v.  Neville 3  Dev.  31 49 

Collins  V.  Central  Bank 1  Kelly,  435 639 

I'.  Chicago 4  Biss.  472 IL  141 

r.  Emett 1  H.  Bl.  313 370 

V.  Gilbert 94  U.  S.  757    . 565 

Colt  V.  Ives 31  Conn.  25 496 

r.  Lasnier 9  Cow.  320 317 

1-.  Noble 5  Mass.  167 2.32 

Combs  r.  Scott 12  Allen,  493 101 

Commercial  &  Farmers'  Nat.  Bank  of 

Bait.  1-.  First  Nat.  Bank  of  Bait.    .     .     30  Md.  11 463 

Commercial  Bank  v.  Benedict      .     .     .     18  B.  Monr.  307 650 

I'.  Bonner 13  Sm.  &  Mar.  649      .     .  98,  n.  23,  141 

V.  Cunningham 24  Pick.  270 108,  136 

V.  French 21  Pick.  486 95 

V.  Hughes 17  Wend.  100      ...     289,  324,  355, 

414,  568 

r.  Jones 18  Tex.  811 317 

r.  Kortright 22  Wend.  348      .    .    98, 163, 165,  171, 

713 

r.  ]\Iarine  Bank 3  Keyes,  337 599 

V.  Rhind 1  Macq.  H.  L.  Cas.  643    ...     .  291 

V.  Simmons 10  Alb.  Law  Jour.  155      .     .     .  IL  157 

r.  Slocomb       14  Pet.  60 46 

V.  State 6  Sm.  &  Mar.  599,  622      .     .     761,  764 

v.  Thompson 7  Sm.  &  Mar.  443 637 

?;.  Union  Bank 19  Barb.  391,  1  Kern.  203      .246,252, 

278,  299 
Commercial  Exch.  Nat.   Bank  v.  Nat. 

Bank  of  Rep 9  Phila.  133 466 

Commercial    Mut.    Mar.    Ins.    Co.    v. 

Union  Mut.  Ins.  Co 19  How.  318 98,  n.  13 


XXX  TABLE   OF    CASES. 

[All  references  are  to  Sections.] 

Commercial  Nat.  Bank  i;.  Ilenninger    .  lOo  Pa.  St.  49G,  500      ...    188,  5G2 

,..  Proctor yy  111-  5i>8 329,  5G1 

Commercial    Press    v.   Crescent   City 

Nat.  Bank 2G  La.  An.  744 391 

Commissioners  v.  BoUes 4  Otto,  104 758 

Commonwealth  c.  AUegliany  Co.      .     .    20  Pa.  St.  185 7G0 

f,  Barry 116  Mass.  1 II.  159 

t.icain •     •     SSerg.  &R.  510 43 

V.  Cochituate  Bank 3  Allen,  42 677,  G78 

V.  Commercial  Bank     ....     28  Pa.  St.  383 7G1 

r.  Cullen 13  Pa.  St.  133 758 

I..  Essex  Co 13  Gray,  253 7GG 

I..  Felton 101  Mass.  204 U.  159 

,  ,.  Fisher 17  Mass.  40 298 

v'.  Ketner 92  Pa.  St.  372 XL  1.59 

V.  McAllister 28  Pa.  480 004 

V.  Manufac.  &  Mech.  Baiik   .     .  2  Pearson,  (Pa.)  386    '.     .     .   II.  141  .s 

V.  Savings  Bank 98  Mass.  12 650 

V.  Scituate  Savings  Bank      .     .     137  Mass.  301 G04 

i:  Stone 4  Met.  43 062 

i;  Tenney 97  Mass.  50 IL  159 

V.  Worcester 3  Pick.  462 43 

Comp  V.  Carlisle  Deposit  Bank     ...    94  Pa.  St.  409 203,  209 

Compton  V.  Oilman PJ  W.  Va.  310 425 

Comstock  V.  Willoughby Hill  &  Den.  271 77 

Conant  i-.  Schuyler 1  Paige,  316 550 

V.  Seneca  Co.  Bank 1  Ohio  St.  298     .     .  128,  G99,  717,  761 

Concord  v.  Concord  Bank 10  N.  H.  26     .     .     .  169,  289,  295,  355 

Condon  v.  Pearce 43  Md.  83 56d 

Conklin  v.  Second  Nat.  Bank  ....  53  Barb.  512  ...  .  698  A,  IL  112 
Connecticut  &  Passumpsic  River  R.  R. 

Co.  V.  Bailey 24  Vt.  465 669 

Connelly  v.  McKean 04  Pa.  St.  113 409 

Conner  v.  Henderson 15  Mass.  320 103 

Conroy  v.  Warren 3  Johns.  Cas.  259     .      .  393,  421,  n.  9, 

Continental  Bank  v.  Elliott  Bank      .     .     7  Fed.  Rep.  373 711 

Continental  Nat.  Bank  v.  Nat.  Bank  of 

Commonwealth 50  N.  Y.  575 478 

Converse  v.  Norwich,  &c.  R.  R.  Co.  .     .     33  Conn.  166 56 

Conway  v.  Halsey 44  N.  J.  Law,  462 717 

Conwell  V.  Hill 14  Ind.  131       644 

Conyngham's  Appeal 57  Pa.  St.  474 ^^^' \'! 

Cook  ..  Moffat 5  How.  295 12,  n.  18 

t>.  State 13  Ind.  154 -27 

V.  State  Nat.  Bank 62  N.  Y.  9G,  50  Barb.  3.39             46,  98, 

155,  414,  II.  106,  157 

V  Tullis 18  Wall.  332 326.  590 

V.  Wagster 1  Sm.  &  G.  296 GOO 

Cooke  V.  Seely 2  E.xch.  749 439- 

«.  United  States 91  U.  S.  389 489 

Cookendorfer  v.  Preston 4  How.  U.  S.  317 9,  113 

Cooper  V.  Burr 46  Barb.  9 oil 


TABLE    OF    CASES.  XXXI 

[All  references  are  to  Sections.] 

Cooper  V.  Curtis 30  Me.  488 98,  158,  176 

V.  Frederick 9  Ala.  7;]8 43 

V.  Kane 19  Wend.  386 9,  n.  12 

V.  Mowry 16  Mass.  7 322 

Coote  V.  Bank 3  Cranch,  C.  C.  50 439 

Coots  V.  McConnell 39  Mich.  742 589 

Cope  V.  Dodd 13  Pa.  St.  33 9,  n.  5 

Coppell  V.  Hall 7  Wall.  558        747 

Corbet?;.  Bank  of  Smyrna 2  Ilarr.  235  .     .     .     289,312,637,062 

Corbett  v.  Woodward 5  Sawyer,  403 124 

Cordell  v.  First  National  Bank  of  Kan- 
sas City 64  Mo.  600 307 

Corgan  i>.  Frew 39  111.  31       366 

Cork  V.  Bacon 45  Wise.  192 367 

Corlett  V.  Conway 5  M.  &  W.  655 418 

Corn  Exchange  Bank  v.  Blye  ....     2  N.  Y.  112 217 

V.  Blye 101  N.  Y.  303 II.  152 

V.  Nassau  Bank 91  N.  Y.  74 476 

Corn  Exch,  Nat.  Bank  v.  Nat.  Bank  of 

Kepublic .     78  Pa.  St.  233 466,  489 

Corser  v.  Craig 1  Wash.  C.  C.  424      .     .   493,  494,  538 

V.  Paul 41  N.  H.  24 158 

Cotter  V.  Doty 5  Ohio,  395 43 

Coulter  V.  Robertson 24  Miss.  278 706 

County  Comnaiss.  of  Frederick  Co.  v. 

Farm.  &  Mech.  Nat.  Bank     ....     48  Md.  117 II.  141  n 

County  of  Des  Moines  y.  Hinkley     .     .     62  Iowa,  637 495,541 

Covington  City  Nat.  Bank  v.  City  of 

Covington 21  Fed.  Rep.  484  ...     .     II.  141  v. 

Cowell  V.  Simpson 16  Ves.  Jr.  278 830 

Cowing  V.  Altman 71  N.  Y.  435 442 

Cowles  V.  Cromwell 25  Barb.  413 673 

V.  Gridley 24  Barb.  301 669 

Cowperthwaite  v.  Sheffield      ....     3  Comstock,  243 493,  502 

Cox  V.  Boone 8  W.  Va.  500 423 

V.  Hill 6  Md.  274 615 

Coxe  V.  State  Bank 3  Halst.  172 637 

Cragie  v.  Hadley 99  N.  Y.  133      ....    109,  574,  589 

Craig  y.  Libbett 15  Pa.  238 225 

V.  Missouri 4  Pet.  410,  432  .     .     .     .      51,  298,  665 

Crainy.  First  Nat.  Bank  of  Jacksonville     114  111.516 160 

Crandall  v.  Schroeppel 1  Hun,  557 248 

Crawford  v.  Royal  Bank Ross.  Lead.  Cas.  229      ....     652 

V.  West  Side  Bank 100  N.  Y.  50 456 

Crease  v.  Babcock 10  Met.  525       689,  693 

Credit  Co.  v.  Howe  Co 54  Conn.  357 167,  745 

Creed  y.  Commercial  Bank 11  Ohio,  489 50 

Crescent  City  Nat.  Bank  p.  Case      .     .     99  U.  S.  628 683 

Creveling  v.  Bloomsburg  Nat.  Bank     .  46  N.  J.  Law,  255      ....  493,  525 

Crews  V.  Farmers'  Bank 31  Gratt,  384 230 

Crocker   v.   First    National    Bank   of 

Chetopa 11  Am.  Law  Rev.  169   ..     .     II.  130 

V.  Higgins        7  Conn.  347 499 


SXXii  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Crocker  v.  Marine  Nat.  Bank    ....     101  Mass.  240 II.  167 

r.  Wliitney 71  N.  Y.  101 75,11.128 


Crocket  v.  Young 1  Sm.  &  Mar.  241 158 

Cromwell  r.  Lovctt 1  Hall,  (N.  Y.)  56      .     .    421,425,544 

Crosskill  v.  Bower 32  Beav.  86 289,  309,  508 

Crossly  r.  Ham       13  East,  498 565,  n.  10 

Crout  f.  De  Wolf *   1  B.  I.  393 468 

Crow  V.  Mechanics  &  Traders'  Bank     .     12  La.  An.  692 246 

Cruger  v.  Armstrong 3  Johns.  Cas.  5     .  393,  402,  421,  n.  10, 

442 

Crumb  v.  Treiber 4  Bull.  616 342 

Crystal  Plate  Glass  Co.  v.  First  National 

Bank 6  Mont.  303 170 

Cullen  V.  Thompson 9  Jur.  n.  s.  85 102,  132 

Cumming  v.  Shand 29  L.  J.  Ex.  129 9,  n.  1 

Cummings  v.  Boyd 83  Pa.  St.  372 565,  n.  15 

V.  Winn 89  Mo.  51 628 

Cummins  i-.  Ilcald 24  Kans.  600 267 

Cundy  v.  Marriott 1  Barn.  &  Ad.  COG 743 

Curcier  v.  Pennock 14  Scrg.  &  R.  51 113 

Curran  i'.  State  of  Arkansas     ....     15  How.  304 718 

V.  Witter 31  N.  W.  705 302 

Carrie  v.  Misa L.  K.  10  Exch.  163 546 

Currier  v.  Davis Ill  Mass.  480 425 

Curry  r.  Powers 70  N.  Y.  212 615 

Curry  v.  Scott 54  Pa.  St.  270       707 

Curtis  V.  Leavitt 15  N.  Y.  19      .13,  51,  63,  77,  98,  n.  36, 

137,  232,  289,  297,  298,  568,  743 

i^.  Portland  Savings  Bank      ..     77  Me.  151 611,  612 

V.  Swartwout 1  N.  Y.  Leg.  Obs.  406 74 

Cushing  V.  Gore 15  Mass.  69 388 

Custer  V.  Tomkins  Co.  Bank    ....     9  Barr,  27 134 

Cutting  V.  Gilraan 41  N.  H.  147 608 

;;.  Marlor 78  N.  Y.  454 212 

Cutts  V.  Perkins 12  Mass.  206 400,  649 


D. 


Da  Silva  v.  Fuller Chitty  on  Bills,  180 

Dabney  v.  Stevens 40  How.  (N.  Y.)  341 

Dacy  V.  N.  Y.  Chemical  Manuf.  Co.  .     .  2  Hall,  550         .     . 

Daggett  I'.  Whiting 35  Conn.  372      .     . 

Dale  V.  Sollet 4  Burr.  2133  .     .     . 

Daly  V.  Butchers  &  Drovers'  Bank  of 

St.  Louis 56  Mo.  94  .     . 

Dana  v.  Bank  of  United  States    ...  5  Watts  &  S.  223   . 

V.  National  Bank 132  Mass.  15G    .     . 

V.  Third  National  Bank        ...  13  Allen,  445     .     . 

Daniels  v.  Kyle       1  Kolley,  Ga.  304 

Dann  v.  City  of  London  Brewery  Co.  .  L.  K.  8  Eq.  155 

Darling  v.  Stanwood 14  Allen,  504     . 


.  .  389 
,  .  43 
434,  440 
,  .  565 

.  .  328 


214,  274,  287 
.  .  120 
290,  472 
446,  493 
381,425 
9,  n.  11 
274,  286 


TABLE    OF   CASES.  XXXlii 

[All  references  are  to  Sections.] 

Darriiigton!.'.  Bank  of  State  of  Alabama     13  How.  U.  S.  12         6G4 

Davenport  v.  City  Bank  of  Buffalo  .     .     9  Paige,  12 6t33 

Davey  v.  Jones 42  N.  J.  Law,  30     ....      252,  205 

Davies  y.  Dodd 1  Wils.  Ex.  110 649 

V.  Watson 2  Nev.  &  M.  709 487 

Davies  Co.  Savings  Ass.  v.  Sailor      .     .    63  Mo.  24 169 

Davis  y.Adae 4  Bull.  (Cin.)  295 642 

V.  Bangor 42  Me.  522         102 

V.  Bartlett 12  Ohio  St.  537 565 

V.  Benton 2  West.  L.  Mo.  423 424 

V.  Bowsher 5  T.  R.  488          ...      324,  325,  567 

V.  Cook 9  Nev.  134 II.  157 

f.  First  Baptist  Society  of  Essex    44  Conn.  582 11.112  6 

V.  Lenawee  Co.  Savings  Bank   .     53  Mich.  163 290,  619 

V.  Meeker 5  Johns.  354       103 

V.  Ney 125  Mass.  590 612 

V.  Randall 115  Mass.  547           144,  n.  18,  XL  130  c 

i:  Smith 29  Minn.  201 289 

V.  Stevens 17  Blatchf.  259        68.3 

Davison  v.  City  Bank 57  N.  Y.  82         546 

Dawson  v.  Laws Kay,  280        33 

V.  Real  Estate  Bank     ....  6  Ark.  299      .     183,  186,  190,  192,  324, 

326,  562,  568 

Day  V.  Thompson        65  Ala.  269 516 

Dayton  v.  Brost 7  Bosw.  115        674 

Dayton  Nat.  Bank  v.  Merchants'  Nat. 

Bank       37  Ohio  St.  208 714 

De  Barnales  r.  Fuller 14  East,  690       664 

De  Feriet  v.  Bank  of  America      .     .     .     23  La  An.  310       469 

De  Haven  v.  Kensington  Nat.  Bank      .     81  Penn.  St.  95       194 

V.  Williams 80  Penn.  St.  480 438 

De  la  Chaumette  v.  Bank  of  England    .     9  Barn.  &  Cr.  208 652 

De  Mayer  v.  State  Nat.  Bank       ...     8  Neb.  104 454 

De  Peau  v.  Humphreys 20  Mart.  La.  1 12,  n.  15 

Dean  v.  Allen 8  Johns.  390       335 

Dearborn  v.  Union  Nat.  Bank       ...     58  Me.  273  59,  211 

Debolt  V.  Ohio  Life  Ins.  &  Trust  Co.    .     1  Ohio  St.  563 6 

Decatur  Nat.  Bank  u.  Murphy      .     .     .     9  111.  App.  112         587 

Dedham  Bank  v.  Chickering    ....     3  Pick.  335         20,  27 

Deener  v.  Brown 1  MacArthur,  350  ....  421,  n.  15 

Delafield  v.  Kinney 24  Wend.  345    ....     .    144,  n.  19 

Delano  v.  Butler 118  U.  S.  634 II.  113 

V.  Case 12  N.  E.  676 130 

Delaware  &  Hudson  Canal  Co.  v.  Penn- 
sylvania Coal  Co 21  Pa.  St.  131        98 

1;.  Westchester  Co.  Bank  .     .     .     4  Den.  97  499 

Delaware,  L.,  &  W.  R.  R.  Co.  r.  Oxford 

Iron  Co 38  N.  J.  Eq.  340 IL  135 

Delmotte  v.  Taylor 1  Redf.  417  (N.  Y.) 611 

Denmon  v.  Boylston  Bank 5  Cush.  194        336 

Descombes  v.  Wood 91  Mo.  196 120 

Desha  v.  Holland 12  Ala.  513        9,  n.  6 

Des  Moines  Nat.  Bank  v.  Chisholm      .     33  N.  W.  234 600 

VOL.  I.  c 


XXXIV  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Deters  v.  Harriot 1  Show.  164       443 

Detroit  Savings  Bank  r.  Ziegler  ...     4!)  Micii.  157        26 

Devaynes  v.  Noble 1  Mer.  541       .     .     .  289,  291,  355,  568 

Devendorf  v.  W.  Va.  Oil  &  Land  Co.    .     17  VV.  Va.  135 425 

Devol  V.  Mcintosh 23  Ind.  529 499 

Dewar  v.  Bank        115  111.  22        471 

Dewey  v.  St.  Albans  Trust  Co.     .     .     .     56  Vt.  476 627 

Dick  V.  Leverick 11  La.  573 476 

Dickerson  I'.  Wason 47  N.  Y.  439 599 

Dickinson  v.  Central  Nat.  Bank   .     .     .     129  Mass.  279 710 

V.  Coates 79  Mo.  250       493,  522 

V.  Valpy 10  B.  &  C.  140 131 

Dickson  v.  Evans 6  T.  R.  57        640 

Diven  r.  Lee       36  N.  Y.  302 686,   693 

V.  Phelps 34  Barb.  224 641 

Dixon  V.  Dunham 14  111.  324 9,  n.  7 

V.  Nuttall 1  C.  M.  &  R.  307 380 

v.  Rankin 1  Am.  R.  R.  Cas.  569     ...     .      102 

Di.xon's  Case 2  Lewin  Cr.  Cas.  178     ....      435 

Dodd  V.  Wilkinson 9  Atl.  R.  685 130 

Dodge  V.  Mastin 5  McCrary,  404     .         ...  022,  628 

V.  Nat.  Exchange  Bank     ...  20  Ohio  St.  234    463,  474,  494,  511,  534 

1-. 30  Oliio  St.  1 457 

r.  Rerkins 9  Pick.  368 309 

Dodwell  r.  Oxford 2  Vent.  34 48 

Dole  V.  Lincoln       31  Me.  422 608 

Donnell  v.  Lewis  Co.  Savings  Bank      .     80  Mo  105 63 

Dorchester  &  Milton  Bank  v.  New  Eng- 
land Bank       1  Cush.  177         9,  n.  5,  221,  222,  231, 

274,  286 

Dorsey  t'.  Abrahams        5  Rep.  53  (Penn  )       .     .     .       155,413 

Doty  V.  Wilson       47  N.  Y.  580 612 

Dougherty  v.  Hunter       54  Penn.  St.  380    ...     .      98,  n.  26 

V.  Western  Bank 13  Ga.  287 644 

Donlan  v.  Provident  Institution    ...     127  Mass.  183 620 

Dow  V.  Sperry 29  Mo.  390 468 

Down  i'.  Hailing 4  Barn.  &  Cr.  330  .     .     .380,441,442 

Downer  v.  Madison  City  Bank     ...     6  Hill,  648 250,  205,  278 

Downes  c.  Phamix  Bank 6  Hill,  297     .      289,311,322,458,568 

Drake  v.  Markle 21  Ind.  433 299 

Dresser  f.  Dresser 46  Me.  48 611 

r.  Norwood 17  C.  B.  n.  s.  466    .     .     .     .      109,  1-34 

Dreyfuss  v.  Adae 4  Bull.  671 542 

Driesbach    v.    Second    Nat.   Bank    of 

Wilkesbarre 104  U.  S.  52 II.  130  t 

DriscoU  1-.  West  Bradley 59  N.  Y.  96 43 

Drovers'  Nat.  Bank  v.  Anglo-American 

P.  &  P.  Co 117  111.  100 236 

t'.  O'Hare 10  N.  E.  Rep.  360  (111.)     .    .  9  G,  208 

Druid's  Case 1  Wm.  Rob.  405 102 

Dry  V.  Davey 10  Ad.  &  El.  30       29 

Ducat  V.  Chicago 48  111.  172        46 

Dufaur  v.  Oxenden 1  M.  &  Rob.  90 418 


TABLE   OP   CASES. 


XXXV 


[All  references  are  to  Sections.] 


Duffy.  East  India  Co 

Duffy  V.  Byrne 

Duncan  v.  Berlin 

V.  Brennan 

V.  First  National  Bank  of  Mount 

Pleasant 

V.  Jauclon 

V.  Magette 

Dunham  r.  Gould 


15  Ves.  Jr.  108 
7  Mo.  App.  417 
60  N.  Y.  151  . 
83  N.  Y.  487    . 


439 
628 
346 
325 


Dunkle  v.  Rennick 

Dunlap  V.  Smith 

Dunston  v.  Imperial  Gas  Co 

Durham  y.  Bischoff 

Durkin  v.  Exchange  Bank        .     .     .     . 
Dutcher  v.  Importers  and  Traders'  Nat. 

Bank 

Dutton  V.  Pool 

Duval  V.  Farmers'  Bank 

Dyer  v.  Walker 

Dykers  v.  Leather  Manuf.  Co.       .     .     . 


11  Bank.  Mag.  787  ...     .      II.  180 

15  Wall.  165 166,  317 

25  Tex.  245 248 

16  Johns.  367 9,  n.  9,  50 

6  Ohio  St.  534 78 

12  111.  399 6.37 

3  B.  &  Ad.  125 140 

47  Ind.  211 490 

2  Patt.  &  H.  277       ....      30,  176 

59  N.  Y.  5 452,  625 

I  V'ent.  318 499 

9  Gill  &  J.  31 9,  n.  5 

40  Pcnn.  St.  157 7G3 

II  Paige,  612        .      388,  398,  414,  450 


E. 


Eagle  Bank  v.  Chapin 

V.  Hathaway    . 

V.  Smitii  .     .     . 


3  Pick.  180  . 
5  xMet.  212  . 
5  Conn.  71  . 


Eans  V.  Exchange   Bank  of  Jefferson 

City 79  Mo.  182 

East  Haddam  Bank  v.  Scovill      ...  12  Conn.  308 

East  River  Nat.  Bank  v.  Gove      .     .     .  57  N.  Y.  597 

Eastern  Bank  v.  Capron 22  Conn.  639 

Eastern  Railroad  v.  Benedict    ....  5  Gray,  561 . 

Eastman  v.  Commonwealth      .     .     .  ■ .  4  Gray,  416 

V.  Coos  Bank 1  N.  H.  23   . 

Easton  i'.  Pratchett 1  C.  M.  &  R.  f 

Eaton  V.  Pacific  Bank 144  Mass.  260 

Eaves  v.  People's  Savings  Bank  ...  27  Conn.  234 

Ecker  v  First  Nat.  Bank  of  N.  Windsor  .  59  Md.  291  . 

Edgerly  v.  Emerson 3  Fost.  555  . 

Edie  I'.  East  India  Co 2  Burr.  1216 

Edmunds  v.  Digges 1  Gratt.  359 

Edson  V.  Angeli 58  Mich.  .336 

Edwards  v.  Jones 1  My.  &  Cr.  283 

V.  Morris 1  Ham.  524 

V.  Thomas        66  Mo.  486  . 

y.  Union  Bank  of  Florida       .     .  1  Fla.  136     . 

Egbert  v.  Payne 99  Pa.  St.  239 

Egerton  v.  Fulton  Bank       43  How.  Pr.  216 

Egg  V.  Barnett 3  Esp.  196    .     . 

Ehlerman  v.  St.  Louis  National  Bank  .  14  Mo.  App.  591 

Eichelberger  v.  Finley       7  Har.  &  J.  381 


.  .   232 

.  .   233 
464,  659 

320,  IL  143 
249,  205,  274,  287 
1,  n.  18,  179 
641 
95 
635 
n.  22,  159 
.   551 
IL  118 
.   620 
.   101 
.   124 
.   593 
,   662 
.   596 
.   611 
.   639 
565,  n.  12  &  13 
102,  n.  10 
604 
186 
552 
559 
357 


XXXVl  TABLE    OP    CASES. 

[All  references  are  to  Sections.] 

Eidman  i-.  Bowman 58  111.  444 127,  707 

Elder  v.  First  Nat.  Bank  of  Ottawa  .     .  12  Kans.  238     ....       750,  II.  12!) 

Ellicott  i'.  Barnes 31  Kans.  170 567 

Elliott  V.  Abbott 12  N.  H.  54!) 124,  158 

Ellis  I'.  Amazon 2  Dev.  Eq.  273 576 

V.  First  Nat.  Bank  of  Olney  .     .  11  111.  App.  275     ....       II.  130  / 

V.  Little 27  Kans.  707 II.  150  c 

V.  Ohio  Life  Ins.  &  Trust  Co.      .    4  Ohio  St.  628 9,  n.  9 

V.  Secor       31  Midi.  185 611 

i;.  Turner 8  T.  R.  531 275 

V.  Wheeler 3  Pick.  18 393 

&  Morton  v.  Ohio  Life  Ins.  & 

Trust  Co 4  Ohio  St.  C28        466 

Elting  I'.  Brinkerhoff 2  Hall,  459 425 

Elwell  V.  Dodge 33  Barb.  336      .     .     98,  n.  26,  158,  165 

Emery  v.  Hobson 62  Me.  578 391,  425 

Emly  V.  Lye       15  East,  7 439 

Ernst  V.  NichoUs 6  H.  L.  Cas.  401        440 

Erwin  v.  Branch  Bank  at  Mobile      .     .     14  Ala.  307 170 

V.  Downs 15  N.  Y.  575 565 

Espy  V.  Bank  of  Cincinnati      ....  18  Wall.  004  .     .     103,  155,  1G7,  3G7, 

378,  408,  414,  n.  16,  482 
Essex  County  Nat.  Bank  v.  Bank  of 

Montreal 7  Biss.  193         247,  414,  n.  23,  415,  493 

Evans  v.  Anderson 78  111.  558 12,  n.  13 

V.  Ilallam G  L.  R.  Q.  B.  713 400  A 

Evansville  Nat.  Bank  v.  Metropolitan 

Nat.  Bank 6  Amer.  Law  Rev.  574       .     .     IL  112 

Everett ;;.  Collins 2  Camp.  515 544 

V.  United  States 6  Port.  166 158,  171 

Evcrly  v.  Rice 8  Harris,  297 562 

Ex  parte  Barratt 1  01.  &  J.  327 337 

Bennett        18  Beav.  339 125 

Bignold 1  Deac.  735 390 

Blagden       17.Ves.  Jr.  466 329 

Bond 1  M.  D.  &  DeG.  10       .     .     102,  n.  27 

Brown 2  Story,  503 380 

Buckley 14  M.  &  W.  469 439 

Burn        2  Rose,  55 337 

Clutton        1  Fond.  IGG      ....    289,  589,  629 

Collins 2  Cox,  427 437 

Eyre 1  Piiil.  227    ...     .      102,  n.  25,  325 

Flint        1  Swanst.  30 329 

Frowde 9  W.  R.  328 132 

Hornby De  Gex,  69       337 

Howard  National  Bank     ...    2  Low,  487        337 

Hunter 2  Rose,  363 437 

Johnson       6  L.  R.  Ch.  212      ....    102,  n.  26 

Kingston 6  L.  R.  Ch.  632 327 

Marquis  of  Abercorn    .     .     .     .    31  L.  J.  Ch.  828 138 

McKenna 3  L.  J.  Bank.  20 326 

Nichols 5  Jur.  N.  S.  205 132 

Overend,  Gurney,  &  Co.   .     .     .    L.  R.  4  Cii.  460 103 


TABLE   OF   CASES.  XXXVll 

[All  references  are  to  Sections.] 

Ex  parte  Pease 1  Rose,  232 324 

Pease 19  Ves.  25 593 

Pye 18  Ves.  Jr.  140 610 

Randleson 2  Deac.  &  C.  534 327 

.  Kigby 19  Ves.  Jr.  463       438 

Robinson 2  DeG.  M.  &  G.  517        ....     125 

Roney 33  L.  J.  Ch.  731 138 

Rowton        1  Rose,  15 583 

Sargeant 1  Rose,  153 583 

SclioUenberger 96  U.  S.  369 46 

South 3  Swanst.  392 407 

Stevens 11  Ves.  Jr.  24         329 

Thompson 1  Mont.  &  MacA.  102               .     .     583 

Wakefield  Bank 1  Rose,  243,  19  Ves.  Jr.  25 .     .     .    324 

Waring 36  L.  J.  Ch.  151      ....      289,  568 

Exchange    Bank    v.    Bank   of    North 

America 132  Mass.  150 557,  461 

V.  Farmers'  Bank 19  Gratt.  738 641 

V.  Knox 19  Gratt.  746 637 

V.  Rice 107  Mass.  37 499 

V.  Tiiird  Nat.  Bank        ....     112  U.  S.  290 252,  272 

V.  Tiddy 07  N.  C.  169 637 

Excliange  National  Bank  v.  Miller   .     .  19  Fed.  Rep.  372   ....     II.  141  x 

Exeter  Bank  v.  Rogers 7  N.  H.  21 16,  27,  42 

Exton  V.  Scott         6  Sm.  31 610 

Eyerman  v.  Second  Nat.  Bank     ...  13  Mo.  App.  289,  84  Mo.  408  .    .    604 


Fabens  v.  Mercantile  Bank      ....  23  Pick.  330       218,  232,  236,  2-52,  274, 

286 

Fairfield  Savings  Bank  v.  Chase  ...  72  Me.  226    ..     .     108,  109,  111,  134 

Fairlie  v.  Hastings 10  Ves.  123 167 

Falklend  v.  St.  Nicholas  Nat.  Bank  .     .     84  N.  Y.  145 326 

Fargo  V.  McVickar 38  How.  N.  Y.  1 46 

Farley  v.  Turner 26  L.  J.  n.  s.  710    .     .     .   188,  327,  567 

Farmer  v.  Russell 1  B.  &  P.  296 499 

Farmers  &  Mechanics'  Bank  v.  Baldwin    23  Minn.  201 9,  n.  9,  73 

V.  Butchers  &  Drovers'  Bank      .  16  N.  Y.  125      98,  n.  17,  103,  155,  167, 

174,  413,  414,  n.  14,  418,  745 

i.v  Champlain  Transportation  Co.     18  Vt.  131 77,113,716 

V. 23  Vt.  186 98 

V.  Hearing        91  U.  S.  29    .     .     .       755,  II,  100,  130 

V.  Franklin  Bank 31  Md.  38 346 

V.  King 57  Pa.  St.  202         343,  346  A,  433,  567 

V.  Planters'  Bank 10  Gill  &  J.  422 322 

V.  Ryan        46  Pa.  St.  236 346  A 

V.Smith 19  Johns.  115 9,  n.  9,  43 

V.  Sprague        52  N.  Y.  605 9,  n.  12 

Troy  City  Bank         ....  1  Doug).  457      ....    153,  156,  167 


Farmers  &  Merchants'  Bank  v  Downy  .     53  Cal.  466 125 


XXXviii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Farmers  &  Merchants' Bank  r.  Wallace  12  N.  E.  Rep.  439  (Ohio)      .     .    11.128 

I'.  Wasson 48  Iowa,  336 607 

Farmers  &  Traders'  Bank  v.  Harrison  .     57  Mo.  503 750 

Farmers'  Bank  v.  Burchard      ....     33  Vt.  346 750 

r.  Duval 7  Gill  &  J.  78     .     .     223,229,231,2.32 

r.  Lifileiiart G  Gill,  50 699,  701 

V.  McKce 2  Pa.  St.  318 144 

1-.  Owen        6  Cranch  C.  C.  504 250 

V.  Tayne 25  Conn.  444 136 

V.  Reynolds 4  Rand.  186       050, 651 

1-.  Vail 21  N.  y.  485 232,  454 

Farmers'  Loan  Co.  v.  McKinney  ...     6  McLean,  1 46 

Farmington  Savings  Bank  v.  Fall     .     .     71  Me.  49 750 

Farrar  r.  Alston 1  Dev.  69 359 

V.  Oilman 1  App.  440 165 

Farwell  i-.  Boston  &  W.  R.  R.  Co.    .     .     4  Met.  49       102 

V.  Curtis 7  Biss.  160 428 

Fatman  v  Lobach 1  Duer,  S54 713 

Fawcett  v  Laurie 1  Drew.  &  S.  192 128 

Fay  V.  Noble 12  Cush.  1 158 

Featherston  v.  Norris 7  S.  Car.  472 290 

Feckeimer  v.  National  Excliange  Bank 

of  Norfolk 78  Va.  80      ....       755,  IL  112  a 

Fells  Toint  Savings  Inst.  v.  Weedon  .     .     18  Md.  528 299,  302 

Felton  V.  Dickinson 10  Mass.  287 499 

Fenner  i-.  Meares 2  W.  Bl.  1209 499 

Fernandez  v.  Glynn 1  Camp.  426 352,  450 

Field  V.  Holland 6  Cranch,  8        562 

V.  Nickerson 13  Mass.  131 302 

Fifth  Ward  Savings  Bank  v.  First  Na- 
tional Bank 47  N.  J.  Eq.  357 144  J 

Figley  v.  McDonald 89  Pa.  St.  128 421,  n.  20 

Finkbone's  Appe.al 86  Pa.  St.  368        322 

Finnucane  v.  Small 1  Esp.  315     ....      102,  n.  22,  201 

First  National  Bank  v.  Alexander    .     .     84  N.  C.  30        421,  n.  17 

I'.  Bache 71  Pa.  St.  213 342 

V.  Bennington 16  Blatchf.  53 IL  128 

V.  Bininger 26  N.  J.  Eq.  345 342 

. V.  Born Indiana,  MS 415 

V.  Butler 19  Wk.  R.  (JOl        ....     102,  n.  16 

r.  Childs 133  Mass.  248    ...     .      IL  130,  h,  7 

V.  Christopher 40  N.  J.  L.  4.35 136 

V.  Clark 42  Ilun,  538 159,  300 

V.  Coates 3  McCrary,  9 495, 539 

r.  Coleman 11  Brad.  511 309 

)•.  Crawford 2  Cin.  S.  C.  Rep.  125      ....     573 

V.  D.  &  S.  Co 52  Iowa,  378 495,  541 

V.  Douglas  Co 3  Dill.  298     .     .     .     .  11.  U\,  a,  h,g,  0 

V.  Drake 29  Ivans.  311 101,  n.  5 

V.  Dunbar 19  111.  App.  558 322 

V.  Eancher 48  N.  Y.  524 II.  141  a 

V,  First  National  Bank  of  Rich- 
mond      76  Ind.  5G1 248,  668,  593 


TABLE   OP   CASES.  XXXIX 

[All  references  are  to  Sections.] 

First  Nat.  Bank  v.  Fourth  Nat.  Bank    .     77  N.  Y.  323  ....  219,  240,  247 
V. 16  Hun,  332       247 


t'.  Garlinghouse 22  Oliio  St.  492 II.  130 

V.  Gish 72  Pa.  13       494 

V.  Graham 100  U.  S.  G99 48 

V. 79  Fa.  St.  108 191 

r.  Gregg 79  Pa.  St.  384 002 

V.  Gruber 87  Pa.  St.  468     ..     .       14,  II.  130  m 

V.  Haire 36  Iowa,  443 75,  754 

V.  Harris 108  Mass.  514 72,  442 

V.  Ilayslett 40  Iowa,  659 346  A 

V.  Ilershire 31  Iowa,  18        141  X; 

V.  Hock 7  W.  N.  Gas.  298 77 

V.  Hubbard 49  Vt.  1        II.  157 

V.  Jaggers 31  Md.  38 346 

V.  Kidd 20  Min.  234        II.  102 

V.  Lamb 5  N.  Y.  100 II.  130 

V.  Leach 52  N.  Y.  350      ....  414,  415,  451 

V.  Lucas 21  Neb.  281        147 

V.  Lucas  Co.  Treasurer      ...  25  Fed.  Kep.  749   ...     .     II.  141  v 

r.  Mason  ' 95  Pa.  St.  113 342 

V.  McManigle 69  Cal.  156 395 

V.  McMichael lOG  Pa.  St.  460       ...  409,  493,  526 

v.  Merchants'  National  Bank      .  7  W.  Va.  544    ...     .   406,  408,  413 

V.  National  Exchange  Bank  of  . 

Baltimore 39  Md.  600 77,  II.  108  a 

V. 2  Otto,  122 77 

V. 51  How.  Pr.  320     ...     .   57,  59,  77 

V.  Ocean  National  Bank    .     .    .  60  N.  Y.  278      .     .  48,  98, 191,  194,  196, 

197,  200,  289,  568,  II.  100  a 

V.  Owen 23  Iowa,  185 229 

V.  Peterborough 56  N.  H.  38        II.  141 

V.  Pettit 41  111.  492 512 

V.  Pierson 24  Minn.  141 73 

V.  Reed 36  Mich.  263 106,  147 

;-.  Reno  County  Bank  ....  1  McCrary,  491      ....      326,  593 

I'.  Rex 89  Pa.  St.  308 201 

V.  Ricker 71  111.  439 463 

V.  Sherburne 14  111.  App.  566 72 

V.  Smith 65  111.  44        II.  141  c 

V.  Stauffer 6  Week.  Jur.  793    ....      II.  130  c 

i:  Stewart 107  U.  S.  676 II.  159 

V.  Tappan 6  Kans.  4.56        473 

V.  Waters 10  Blatchf.  242       ....      II.  141  u 

V.  Whitman 94  U.  S.  346       ....  290,  474,  493 

V.  Williams 100  Pa.  St.  123       145 

V.  Zahm 16  W.  N.  Cas.  552      ....          562 

V.  Zent SO  Ohio  St.  105      ...   194,  198,  200 

First  Parish  in  Sutton  v.  Cole      ...     3  Pick.  237 55,  76 

Fisher  v.  Essex  Bank 5  Gray,  373        710 

V.  Fisher 98  INIass.  303 600 

V.  Willmoth 08  Ind.  449        499 

Fishkill  Savings  Inst.  v.  Bostwick    .     .     92  N.  Y.  564 180 


xl 


TABLE   OF   CASES. 


[All  references  are  to  Sections.] 


Fishmonpers'  Co.  v.  Robertson     .     . 

Fisse  i^.  Dietrick 

Fitcli  V.  Keililing 

Flanders  v.  Maynartl 

Fleckner  r.  Bank  of  United  States   . 

Fleiji  V.  Sleet 

Fletcher  v.  Comnionwealtli  Ins.  Co. 

i;.  Fletcher 

V.  Manning 

V.  Pierson 

V.  Sharpe 


12  L.  J.  N.  s.  185 

3  Mo.  App.  584 

4  Sand.  130 

58  Ga.  50       .     . 


.  .  70 
.  .  508 
421,  n.  14 
.     .     579 


Flint  V.  Board  of  Aldermen  of  Boston 

V.  Rogers 

Flour  City  National  Bank  v.  Garfield 

V.  Traders'  National  Bank     . 

Fogarties  v.  State  Bank 

Fogg  V.  Sawyer 

Foley  V.  Hill 

Folger  c.  Chase 

Follansbee  r.  Parker 

Forbcs's  (]!ase 

Forbes  i'.  Omaha  National  Bank 

Ford  V.  Mitchell 

V.  Terrell 

V.  Thornton 


Forster  ?-•.  Mackreth 

Fort  V.  Bank  of  Cape  Fear  .... 
Fortier  v.  New  Orleans  National  Bank 

Foss  !'.  Lowell 

Foster  v.  Bank  of  London    .... 

V.  Bank  of  New  Orleans    .     . 

V.  Clements 

I".  Essex  Bank 


V.  Paulk  .     . 
V.  Shattuck 
r.  Wilson 


8  Wheat.  338         9,  n.  9.  50,  70,  73,  89, 
98,  116,  144,  n.  23,  15G,  158,  750,  761 

43  Ohio  St.  53 544 

18  Pick.  419 21 

4  Hare,  G7 610 

12  M.  &  W.  571 553 

69  Ind.  281         421,  n.  14 

9  N.  E.  1M42        629 

99  Mass.  141 II.  141  g 

15  Me.  67 229 

.30  Hun,  579 324 

35  Hun,  241 414,  n.  22 

12  Rich.  518      ...        494,  499,  536 

9  N.  H.  365        602 

2  H.  L.  Cas.  28      .     .     .    289,  309,  568 
18  Pick.  63 158,  230 

70  11111        .     .     .' 290 

41  L.  J.  Ch.  467 294 

10  Neb.  338        233 

15  Wise.  304 299 

9  Gray,  401        9,  n.  19 

3  Leigh,  095 324 

L.  R  2  Exch.  163       ...      389,  439 

1  Phill.  N.  C.  417        312 

112U.  S.  439 754 

111  Mass.  285 608,612 

3  F.  &  F.  214 294,  446 

21  La.  An.  338       ....      192,  312 

2  Camp.  17        463,  558 

17  Mass.  479   48,  102,  n.  29,  144,  n.  17, 

191,  196,  201,  203,  205,  232,  289, 

568,  660,  717,  765 

41  Me.  428    ...     .     379,  421,  n.  14 

2  N.  H.  446 


Foulker  v.  Union  Banking  Co.      .     .     . 
Fountaino  i\  Carmarthen  R.  R.  Co. 
Fourth  Nat.  Bank  v.  City  Nat.  Bank  of 

Grand  l^apids 

Fowler  c.  Pickering 

r.  Scully 

Fox  r.  Bank  of  Kansas  City     .... 

r.  Northern  Liberties  Bank    .     . 

Fox  ton  V.  Kucking 

Fraker  v.  Cullen 

Francis  ;•.  Evans 

Francistown  Bank  Case 

Frank  v.  Chemical  National  Bank    .     . 
V.  Edwards 


12  M.  &  W.  201 
6  W.  N.  Cas.  109 
L.  R.  5  Eq.  316 


68  111.  398   .  . 
119  Mass.  33   . 
72  Pa.  St.  456 
.30  Kans.  441   . 
3  Watts  &  S.  103 
55  Me.  346  .  . 
24  Kans.  679 
33  N.  W.  93  (Wise 
63  N.  H.  138 
84  N.  Y.  209   . 
10  Exch.  81  . 


370,  474 
.  .  637 
.  .  572 
.  .  440 


329,  494,  530 
.  .  9,  n.  3 
747, IL  128 
.  .  603 
102,  n.  9 
.  .  605 
IL  130/- 
.  .  305 
.  .  617 
.  .  473 


31 


TABLE   OF   CASES.  xli 

[All  references  are  to  Sections.] 

Frank  r.  Wessels 64  N.  Y.  155 299 

Frankfort  Bank  !'.  Johnson       ....  24  Me.  490         .     .     .     80,98,119,127 

Franklin  v.  Vanderpoole 1  Hall,  78      ....      421,  n.  14,  425 

Franklin  Bank  v.  Byrani 39  Me.  489        3t50 

V.  Commercial  Bank      ....  36  Ohio  St.  350 59 

V.  Cooper 36  Me.  179  ...     17,  19,  21,  33, 103 

y.  Freeman 16  Pick.  535 113,388 

V.  Stevens 39  Me.  532 21 

1-.  Steward 37  Me.  519     .     98,  n.  11,  103,  157,  167 

Franklin  Company  v.  Lewiston  Inst,  for 

Savings       68  Me  43 749 

Frazier  v.  Erie  Bank 8  Watts  &  S.  18 343 

V.  Warfield 9  Sra.  &  Mar.  220  .     .     .     •      12,  n.  17 

Freeholders  of  Middlesex  v.  State  Bank  32  N.  J.  Eq.  467     ..     .  254,  544,  587 

V.  Thomas 20  N.  J.  Eq.  41       544 

Freeman's  Bank  v.  Perkins      ....  18  Me.  292 217 

Freese  v.  Brownell 35  N.  J.  L.  285       ....      12,  n.  13 

Freiberg  v.  Cody 55  Mich.  108 423 

Frelinghnysen  v.  Baldwin 16  Fed.  Rep.  452 38 

French  y.  Irwin  .    , 4  Ba.xter,  401 416 

i;.  Raymond 39  Vt.  623 608,612 

Freund    v.  Importers   &  Traders'   Na- 
tional Bank 3  Hun,  689, 12  Hun,  537     .      399,  411 

Fridley  r.  Bowen 87  111.  151 75,  747 

Frontier  Bank  v.  Morse 22  Me.  88 662 

Frost  (.'.  Dominion  Sewing  Machine  Co.  133  Mass.  563 159 

Fruhling  V.  Schroeder 2  Bing.  N.  R.  77     .     .     .     •      398, 408 

Fry  V.  Evans 8  Wend.  530 334 

Frye  v.  Tucker 24  111.  180 54 

Fryer  r.  Rankin 11  Sim.  55 606 

Fuller  V.  Beurut 2  Hare,  402        109 

V.  Hooper 3  Gray,  334        365 

V.  Hutchings 10  Cal.  523         393 

V.  Randall 1  Gray,  608        346 

V.  Smith Ryan  &  M.  49        465 

V.  Smith 1  C.  &  P.  197 558 

Fulton  Bank  v.  Benedict 1  Hall,  480  134 

V.  N.  York  &  Sharon  Canal  Co.  4  Paige,  127       .    .     89,   111,  133,  134, 

144,  n.  16,  440 

V.  PIicEnix  Bank 1  Hall,  557         636 

Fultz  V.  Walters 2  Mont.  165        299 


393 


Fulweiler  v.  Hughes 17  Pa.  St.  440        .... 

Fusz  V.  Spaunhorst 67  Mo.  257         130 


G. 

Gaffney  v.  Colvill 6  Hill,  567 717 

Gallatin  v.  Bradford 1  Bibb,  209         9,  n.  8 

Galveston  R.  R.  Co.  v.  Cowdrey  ...     11  Wall.  459 46 

Gardner  v.  Merritt 32  Md.  78 610 

V.  National  City  Bank  ....  89  Ohio  St.  600      ....      495,  540 


Xlii  TABLE   OF   CASES. 

[All  relerencus  are  to  Sections.] 

Gardner  v.  Post 43  Pa.  St.  19 14  a 

V.  Walsli ■32  Eiig.  L.  &  Eq.  1G2      ....     485 

Garinire  v.  State 104  liid.  444       298 

Garnet  v.  McKewan L.  R.  8  E.xcli.  10 327 

Garrard  v.  Lewis 10  Q.  B.  1).  30         485 

Garrison  v.  Howe        17  N.  Y.  458 691 

Gathwright  v.  Callaway  County  ...     10  Mo.  663 19 

Gauch  v.  Harrison       .......     12  III.  App.  457 695 

Gauleyv.  Troy  City  National  Bank      .     98  N.  Y.  487 204,322 

Gaunt  y.  Taylor 2  Hare,  413        438 

Geary  v.  Page 9  Bosn.  290        615 

Gelpecke  v.  Dubuque 1  Wall.  176        10 

Georgia   Manuf.  &   Paper  Mill  Co.  v. 

Amis 53  Ga.  228 672 

Georgia  Narional  Bank  r.  Henderson    .  46  Ga.  487     .     .  227,  255,  367,  381,  383 

Geovanowicli  r.  Citizens'  Bank    ...     26  La.  An.  15 600 

Geriiardt  v.  Boatman's  Savings  Inst.     .  38  Mo.  60       ...  102,  n.  17,  265,  287 

German  Amer.  Bank  c.  Third  Nat.  Bank  18  Alb.  L.  J.  252, 

2  Tex.  L.  J.  150      ...      247,  568 

German  Bank  v.  Himstedt 42  Ark.  64 342,  434 

German  Excli.  Bank  v.  Commissioners     6  Alb.  N.  C.  394 342 

German  National  Bank  v.  Meadow  croft     1  N.  W.  Kep.  759        727 

German  Savings  Bank  ;;.  Wulfekuhler      19  Kans.  60         128,  n.  13 

German  Savings  Inst.  v.  Adae      ...  8  Fed.  Kep.  106      ....      495,  541 

German  Security  Bank  »'.  Jefferson .     .     10  Bush,  326 700 

Germania  Ins.  Co.  r.  K.  R.  Co.     .    .     .     72  N.  Y.  91 89 

Germania  National  Bank  v.  Case,  Rec.     96  U.  S.  628 683 

Gerrish  v.  New  Bedford  Savings  Inst.   .     128  Mass.  157 609,  610 

Getchell  r.  Chase        124  Mass.  366 545 

Getman  y.  Second  Nat.  Bank  of  Oswego    23  Hun,  498       146 

Gibbs  V.  Fremont 20  Eng.  L.  &  Eq.  555      .     .      12,  n.  15 

Giblin  v.  McMuUen 2  L.  R.  P.  C.  317      102,  n.  20  &  24, 199, 

201 

Gibson  v.  Corner 3  Ga.  47 600 

V.  Goldthwaite 7  Ala.  281 144 

V.  Minet 2  Bing.  7,  9  Moore,  31    ...     .     398 

V.  National  Park  Bank      ...     98  N.  Y.  87        415,  417 

Giddings  v.  Coleman 12  N.  H.  153 496 

Gilchrist  r.  Leonard 2  Bailey,  135 355 

Giles  V.  Perkins 9  East,  12      ....        324,  329,  583 

Gill  V.  Cubitt 3  Barn.  &  Cr.  406  .     .     .      565,  n.  1,  6 

Gillard  v.  Wise 5  Barn.  &  Cr.  134 637 

Gillespie  v.  Mather 10  Pa.  28       51,  299 

Gillett  V.  Campbell 1  Den.  520     ....       98,  n.  35,  165 

f.  Phillips 2  Kern.  114 137,158 

Gillman  v.  Peck 11  Vt,  516 662 

Gilpin  V.  Gilpin 1  My  &  K.  520 610 

Gindat  v.  Meclianics'  Bank 7  Ala  325     ...     0.  n.  19,  9  D,  233 

Girard  Bank  v.  Bank  of  Penn  Township  39  Pa.  St.  92     155,  322,  414,  n.  14,  418 

Gladstone  v.  Tempest 2  Curt.  6-50 554 

Glazier  v.  Douglas 32  Conn.  393 562 

Gleason  v.  Henry 71  111.  109 468 

Glen  V.  Noble 1  Blatchf.  104        393 


TABLE   OF   CASES.  xliil 

[All  references  are  to  Sections.] 

Gloucester  Bank  v.  Salem  Bank  ...  17  Mass.  33   .      289,  464,  487,  658,  659 

Gloucester  Ins.  Co.  y.  Younger    .     .     .    2  Curt.  338 10 

Godbold  V.  Branch  Bank 11  Ala.  101    ...     .     128,  n.  10,  140 

Goddard  v.  Mercliants'  Bank   ....    4  N.  Y.  147 465,  488 

Godin  u.  Bank  of  Commonwealth      .     .     6  Duer,  76 389 

Goetz  V.  Bank  of  Kansas  City      ...     7  Sup.  Ct.  Rep.  318 225 

Gofft;.  Great  Northern  Railway    .     .     .  30  L.  J.  Q.  B.  148       .     .     .    102,  n.  11 

Gold  Mining  Co.  v.  National  Bank    .     .     96  U.  S.  640 752,  753 

Goldsbury  v.  Inhabitants  of  Warwick  .  112  Mass.  384         ....       II.  141  i 

Goldsmid  v.  Lewis  County  Bank      .     .     12  Barb.  407 652 

Goldwick  V.  Bristol  Co.  Savings  Bank       123  Mass.  320 620 

Goodbody  v.  Foster Byles,  p.  25       309 

Goodloe  V.  Godley 13  S.  «&  M.  233    .         .     98,  n.  24  &  25 

Goodman  v.  Simonds 20  How.  343       .      393,  565.  n.  13  &  16 

Goodwin  v.  American  National  Bank    .  48  Conn.  550      ....               .     317 

Gordon  v.  Kearney 17  Ohio,  572      .                        .    .     326 

I'.  Muchler 34  La.  An.  604                 .          .     .     557 

Gough  t'.  Staats 13  Wend.  549                   .  244,  425,  442 

Gould  V.  Cayuga  National  Bank  ...     56  How.  Pr.  505 103 

Goundie  v.  Northampton  Water  Co.      .     7  Pa.  St.  233 754 

Gourley  v.  Linsenbigler 51  Pa.  St.  345 611 

Govenor  v.  Allen 8  Humph.  176 19 

Governor  v.  Carter 3  Hawks.  328 637 

Graham  v.  National  Bank  of  State  of 

New  York 32  N.  J.  Eq.  804 II.  128 

Granimel  v.  Carmer 55  Mich.  201 493,  521 

Grand  Bank  v.  Blanchard 23  Pick.  505 231 

Grand  Gulf  Bank  v.  Archer     .     .     .     .  8  Sm.  &  Mar.  151       ...      754,  763 

Grand  Rapids  Savings  Bank's  Appeal .     52  Mich.  557 676,  688 

Graniteville  Manuf.  Co.  u.  Roper      .     .  15  Rich.  L.  (S.  C.)  138   .     .     .     .     638 

Grant  v.  Cropsey 8  Neb.  205 167 

V.  Mechanics'  Bank  of  Pliila.     .  15  Serg.  &  R.  140       ...      702,  713 

V.  Taylor 85  N.  Y.  Sup.  Ct.  351     ...     .    332 

V.  Vaughn 3  Burr.  1525,  3  T.  R.  177      395  A,  480 

Graves  v.  American  Exchange  Bank    .  17  N.  Y.  208      ....  395,  474,  480 

V.  Lebanon  National  Bank     .     .  10  Bush,  23        .     .      19,  20,  21,  32,  33 

Gray  v.  Johnston 3  L.  R.  H.  L.  Gas.  14     ...     .     317 

V.  Portland  Bank 3  Mass.  364        127,  707 

Gray's  Adm'r  v.  Bank  of  Kentucky      .    29  Pa.  St.  365 393 

Gregg  V.  George 16  Ivans.  546 421 

V.  Union  County  National  Bank     87  Ind.  238 299,  303 

Green  v.  Dennis 6  Conn.  304       76 

V.  Farley 20  Ala.  822        233 

V.  Farmer 4  Burr.  2214 328 

V.  Odd  Fellows'  Bank  ....    65  Cal.  71 320,  322 

V.  Sizer 40  Miss.  530 192,  205 

r.  Tyler 39  Pa.  St.  361 9,  n.  9 

V.  Van  Buskirk 7  Wall.  139 12,  n.  9 

('.  Walkill  National  Bank       .     .     7  Hun,  63 II.  150  « 

Greenfield  Bank  v.  Crafts 4  Allen,  447 468 

Greenleaf  i'.  Mumford 50  Barb.  543 346 

Greneaux  v.  Wheeler 6  Tex.  55 600 

Grew  V.  Breed 10  Met.  569   .      655,  687,  689,  690,  693 


Xliv  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Grew  V.  Bnrditt 9  Tick.  265 334 

Griffin  r.  Central  Bank ^  Kelly,  371 639 

,.  Kemp 4G  Ind.  172 421 

,..  Kiblet G  N.  Y.  Leg.  Obs.  421     ...     .     421 

V,  Rice 1  Hilt.  184 9,  557 

Griffith  V.  Zipperwick 28  Ohio,  388 200 

Grigby  v.  Oakes 2  Bos.  &  P.  52G 637 

Grinnan  v.  Walker 9  Iowa,  426 9,  n.  9 

Grinnell  v.  Suyilam 3  Sandf.  133 493,  502 

Grlswold  V.  Chandler 5  N.  H.  497 309 

Grivot  V.  Louisiana  State  Bank    ...     24  La.  An.  205 318 

Grocers'  Bank  v.  Kingman IG  Gray,  473      ....  19,  32.  34,  42 

V,  Penfield 14  N.  Y.  S.  C.  281       ...    565,  n.  15 

Grocers'  Nat.  Bank  v.  Clark    ....     48  Barb.  2G II.  144 

Gruber  v.  First  Nat.  Bank  of  Clarion     .  8  Weekly  Notes,  113  Pa.    .     II.  130  m 

Grymes  i;.  Howe 49  N.  Y.  17 550,011 

Gulick  V.  National  Bank 56  Iowa,  434 274,  283 

Gutnbel  v.  Abrains 20  La.  An.  568 193,  312 

Gunkle's  Appeal 48  Pa.  St.  13     ...     . 

Gurney  v.  Howe 9  Gray,  404 

Guthrie  V.  Rcid 107  Pa.  St.  251  ...     .  II.  130,  n.  57 

Gwynn  t;.  Godby 4  Taunt.  346 309 


128,  129 
395 


H. 

Hackett  v.  Reynolds,  Lamberton,  &  Co,     114  Pa.  St.  328 002 

Ilackettstown  National  Bank  v.  Kea      .     G4  Barb.  175 II.  130/ 

Haddock  v.  Citizens'  National  Bank      .     53  Iowa,  542 299 

Hade,  Kec,  v.  McVay 31  Ohio  St.  231 II.  130  m 

Ilagen  v.  Bowery  National  Bank      .     .     64  Barb.  197 476 

Hager  v.  Union  National  Bank  ...  63  Me.  609  .  699,  708,  II.  112,  157  a 
Hagerstown  v.  Loudon   Savings   Fund 

Society 3  Grant,  135 171,  755 

Hagerstown  Bank  v.  Adams   Express 

Co 45  Pa.  St.  419 G48 

Haile  i'.  Peirce 32  Md.  327 154 

Hale  r.  Rawallie •     •  8  Kans.  136  ........    203 

,.   Walker 31  Iowa,  344 II.  150  d 

Hall  V.  Bank  of  State 3  Rich.  366 215,  252 

r.  City  of  Buffalo 1  Keycs,  193 495,  541 

,.  Fuller  ...     5  Barn.  &  Cr.  750 480 

r^'.Harris:     '. 59  N.  H.  71 566,632 

I,  Hu';e 10  Mass.  40 408 

r.  Marston 17  Mass.  575 499 

,,  otcs 77  Me.  122 355 

,..  Smith 2  I).  &  R.  584 439 

V.  Vermont   &    Massachusetts 

R.  R.  Co 28  Vt.  401 140 

r.  Wilson 10  Barb.  584 565 

Hallett  V.  narrower 33  Barb.  537 13 

Hallo svell  f.  Curry 41  Pa.  322 252 


TABLE   OP   CASES.  xlv 

[AM  references  are  to  Sections.] 

Hallowell,  &c.  Bank  v.  Howard    ...     13  Mass.  2.35 637,  640 

Halsey  v.  Brown 3  Day,  34G 9  A,  9  F 

Ham  V.  Greve 34  Iiid.  19 17 

Hambright  v.  Cleveland  Nat.  Bank  .     .     66  Tenn.  40 II.  130  e 

Hamilton  v.  Vouglit 34  N.  J.  Law,  187  .     .     .  565,  n.  1  a  12 

Hamtramck  v.  Bank 2  Miss.  1G9 760 

Hamum  v.  Uichardson 48  Vt.  508 565 

Hanauer  v.  Doane 2  Wall.  342 565,  n.  12 

Hancock  v.  Citizens'  Bank 32  La.  An.  590 331 

Handy  v.  l^ibdin 12  Johns.  220 637 

Hannon  v.  Williams 34  N.  J.  Eq.  255 339 

Harbeck  v.  Craft 4  Duer,  122 421,  n.  9 

Hardy  v.  Blazer 29  Ind.  226 499 

V.  Chesapeake  Bank      ....     51  Md.  585 472 

V.  Veasey 3  L.  R.  Eq.  107 294 

Hare  v.  Copland 13  Irish  C.  L.  426  .     .     .     .      380,  476 

V.  Henty 10  C.  B.  N.  s.  65      .     .     .     45,  238,  427 

Hargroves  v.  Chambers 30  Ga.  580      ....     128,  n.  15,  150 

Barker  v.  Anderson 21  Wend.  372 381,  389 

Harley  v.  Thornton 2  Hill,  S.  C.  509 662 

Harmonson  v.  Bain 1  Hughes,  188 367,  376 

Harper  v.  Calhoun 7  How.  Miss.  203 165 

Harrington  r.  First  National  Bank   .     .  1  Thomp.  &  C.  361    123,  IL  108  c?,  110 

Harris  v.  Babbitt 4  Dillon,  185 27 

V.  Bradley 7  Yerg.  310 476 

V.  Clark 3  Comst.  93  .     .    .     493,  494,  533,  550 

V.  First  Parish  in  Dorchester     .     23  Pick.  112 693 

V.  Lane 16  Ga.  217 687,  693,  694 

V.  McFerren 19  Brad.  172 557 

V.  Runnels 12  Flower,  80 751 

Harrisburg  Bank  v.  Commonwealth      .     26  Pa.  St.  451 666 

V.  Forster 8  Watts,  12 173 

y.  Tyler 3  Watts  &  S.  373    .     .     .     .      167,  343 

Harrison  v.  Central  R.  R.  Co 2  Vroom,  296  (N.  J.)       ....     102 

V.  Sterry 5  Cranch,  298 12,  n.  9 

Harrison,  Rec,  v.  Wright 100  Ind.  515 493,  511,  517 

Harry  v.  Wood 2  Miles,  327 346 

Hart  V.  Albany 9  Wend.  571 43 

V.  The  F.  &  M.  Bank 33  Vt.  252 109,  134 

Hartford  Bank  v.  Barry 17  Mass.  94 158,  159,  165 

V.  Hart 3  Day,  493      ..     .    89,  98,  n.  22,  103 

V.  Stedman 3  Conn.  489 220,  233 

Hasel  V.  Long 2  M.  &  S.  363 27 

Hatch  V.  Atkinson 56  Me.  324 611 

Hathaway  v.  Fall  River  Nat.  Bank  .     .     131  Mass.  14 325 

Hauser  v.  Tate 85  N.  C.  81 148 

Haven's  Petition 8  Bened.  .309 248,  631 

Hawley  v.  Jetter 10  Oregon,  31 234,  383 

Haxtum  v.  Bishop 3  Wend.  13 641,  644 

Hayden  v.  Brooklyn  Savings  Bank  .     .     15  Abb.  Pr.  n.  s.  297 620 

V.  Hayden 142  Mass.  448 610 

Hayes  v.  Western  R.  R 3  Cush.  270 102 

Haynes  v.  Birks 3  Bos.  &  P.  599 232 


Xlvi  TABLE    OF    CASES. 

[All  references  are  to  Sectiote.] 

Hays  ?•.  Northwestern  Bank     ....     0  Gratt.  127 14 

Haywanl  r.  National  Ins.  Co 62  Mo.  181 109,  134 

lleane  r.  Uogcrs 9  Barn.  &  Cr.  577 290 

Ilvart  V.  Kliodes CO  111.  301 54tj 

Heath  V.  rortsmoutii  Savings  Bank      .     46  N.  H.  78 620 

I'.  Second  National  Bank  ...     70  Ind.  107 78 

V.  Silverthorn  Lead  Mining  Co.      39  Wis.  147 505,  n.  15 

Hefner  v.  Dawson C3  III.  403 4G8 

V.  Vandolah G2  III.  483 408 

Hellings  v.  Hamilton 4  Watts  &  S.  402 602 

Hehvege  v.  Ilibernia  National  Bank      .     28  La.  An.  520 414,  482 

lleming  v.  Clutterbuck 1  Bligh,  n.  s.  470 654 

Henman  v.  Dickinson 5  Bing.  183 481 

Henniker  v.  Wigg 4  Q.  B.  (Ad.  &  El.)  792    289,  327,  355, 

662,  568 

Henry  v.  Northern  Bank  of  Alabama    .     63  Ala.  527 145 

Henshaw  v  Koot 60  Ind.  220 421 

Hepburn  v.  School  Directors    ....     23  Wall.  480 XL  141,  c,  y 

Herrick  v.  Whitney 15  Johns.  240 659 

Herring  v.  Kesew South.  Law  Rev.  1872    ....     383 

Hershire  r.  First  National  Bank  .     .     .  35  Iowa,  272      ....     II.  141,  ?>,  7 

Hervey  v.  Lord 11  Biss.  144 II.  150 

Hewett  V.  Adams 50  Me.  271 687,  696 

Hewison  v.  Guthrie 3  Scott,  311 330 

Hewitt  V.  Kaye 37  L.  J.  Ch.  633 550 

Heywood  v.  Pickering 9  Q.  B.  428 236 

Higby  y.  First  Nat.  Bar.k  of  Beverly     .     20  Oliio  St.  75 11.130 

Hill  V.  Gray 1  Stark.  434 21 

I'.  National  Bank  of  Barre      .     .     60  Vt.  582 II.  130  j 

V.  National  Trust  Co 108  Pa.  St.  1 413 

V.  Pine  River  Bank 45  N.  II.  300 701 

V.  Royds L.  R.  8  Eq.  290 512,  564 

V.  Stevenson O.'!  Mo.  364 608,  610 

HiUman  v.  Wilcox 30  Me.  170 103 

Hills  V.  Daniels       15  La.  An.  280 200 

V.  Hills 8  M.  &  W.  401 611,  612 

Himmelman  r.  llotaling 40  Cal.  Ill 421 

Hinsdale  v.  Bank  of  Orange     ....     6  Wend.  378 648,  649,  650 

V.  Larned 16  Mass.  70 643,  657 

Hintermisher  i:  First  Nat.  Bank  .     .     .     64  N.  Y.  212 II.  130 

Hitchcock  V.  Galveston 96  U.  S.  311 758 

Hodges  V.  New  England  Screw  Co.  .     .     1  R.  I.  312 128 

Hodges,  Ex'r,  v.  First  Nat.  Bank      .     .     22  Gratt.  51 143,  145 

Hodgson  V.  Cleever 8  Mo.  App.  318 687 

Hoffman  v.  First  Nat  Bank     .     .     .     .  46  N.  J.  L.  604    569,  582,  583,  586,  593 

Holden  v.  Phelps 135  Mass.  61 97 

Holland  v.  Hey  man 60  Ga.  174 139,  695 

f.  Lewiston  Falls  Bank     .     .     .     62  Me.  664 150 

Holley  V.  Adams 16  Vt.  206 550,  611 

Hollister  v.  Hollister  Bank 2  Keyes,  245 694,  706 

Holmes  v.  Boyd 90  Ind.  332 78 

f .  Roe 28  N.  W.  R.  864 425 

Holt  V.  Bacon 25  Miss.  567 158 


TABLE    OF    CASES.  xlvii 

[All  references  are  to  Sections.] 

Home  National  Bank  v.  Newton  ...     8  III.  App.  503 559 

Home  Savings  Bank  v.  Traube    ...     75  Mo.  I'JO 26 

Honig  ('.  Pacitio  Bank      ......     15  Pac.  K.  58  (Cal.) 314 

Honsoni  v.  Rogers 40  Pa.  St.  190 641 

Hook  V.  Pratt 78  N.  Y.  371 593 

Hooker  y.  Eagle  Bank 30  N.  Y.  83    .     .     .     .       98,  n.  22,  101 

Hoover  v.  Wise 91  U.  S.  308  .     108,  249,  250,  267,  285 

Hopkinson  v.  Foster L.  R.  19  Eq.  74  .     .     .     .  493,  511,  516 

Hopper  V.  Moore 42  Iowa,  563 320 

Home  V.  Green 52  Miss.  452 II.  141 

Horrigan  y.  First  National  Bank  .     .     .     10  Leg.  News,  112 167 

Hortsman  r.  Henshaw 11  How.  177 476,  477 

Hotclikiss  V.  Artisans'  Bank     ....  42  Barb.  517,  2  Keyes,  504     9,  n.  9  &  18, 

179 

V.  Moslier 48  N.  Y.  482 298 

Hongbton  v.  Adams 18  Barb.  545 662 

V.  First  National  Bank  ....  26  Wise.  663      ....     46,  158,  168 

Housatonic  Bank  v.  Martin 1  Met.  294 136 

Hovey  r.  Blanchard 13  N.  H.  145 110 

Howard  v.  Deposit  Bank 80  Ky.  496 316 

V.  Ives 1  Hill,  263 232 

V.  Roeben 33  Cal.  399 188 

V.  Savannah T.  Charlt.  173 43 

V.  Savings  Bank 40  Vt.  597 609 

Howard  National  Bank  of  Burlington 

V.  Loomis 51  Vt.  349 II.  128 

Howe  V.  Hartncss 11  Ohio  St.  449 299 

V.  Merrill 5  Cush.  83 565 

Howell  V.  Adams 68  N.  Y.  314 302 

V.  Village  of  Cassopolis     ...     35  Mich.  471 II.  141  / 

Howland  v.  Myer 3  Comst.  290 165 

Hoyt  V.  Seeley 18  Conn.  353    ....     393,  494,  538 

V.  Slielden 3  Bosw.  267 43 

V.  Thompson 19  N.  Y.  207      .      12,  43,  144,  158,  165 

V. 1  Seld.  320 98,  n.  26 

Hubbard  v.  Board  of  Supervisors      .     .     23  Iowa,  130 II.  141  m 

Huffaker  v.  National  Bank  of   Monti- 
cello  12  Bush,  287 IL  106  a 

Hughes  V.  Bank  of  Somerset  ....     5  Litt.  45 39,  42,  89 

V.  Lake 63  Miss.  557 629 

Hull  V.  Bank Dudley,  259 455 

Hultz  V.  Commonwealth 3  Grant,  61 19 

Hume  V.  Bollan       1  C.  &  M.  130 290 

V.  Commercial  Bank  of  Knox- 

ville 9  Lea,  728 131 

Humphrey  v.  County  National  Bank     .     113  Pa.  St.  417 322 

Humphries  v.  Bickness 2  Litt.  299 393 

Hungerford  National  Bank  v.  Van  Nos- 

trand 106  Mass.  559 II.  106  a 

Hunt  V.  Divine 37  111.  137 13,  302 

V.  Hunt 119  Mass.  474 611 

V. 16  N.  Y.  Sup.  Ct.  622      .     .     12,  n.  13 

V.  Maybee 3  Seld.  266 230 


xlviii 


TABLE   OF   CASES. 


Hunt  V.  Poole 

i;.  Koiisnianier.     .     . 

V.  Van  Alstyne     .     . 

Hunter  v.  Wilson  .... 
Huntington  v.  Savings  Bank 
Huntress  v.  Patten  .  .  . 
Husband  i'.  Davis  .... 
Hussey  r.  Manufacturers'  Ban 
Hutchinson  v.  Sturges  .  . 
Hyde  v.  First  National  Bank 
I'.  Planters'  Bank 


[All  references  are  to  Sections.] 

V.]'.)  Mass.  224 
8  Wiicat.  204 
25  Wend.  G05 
19  L.  J.  Ex.  8 


i)(5  U.  S.  888 
20  Me.  28  . 
10  C.  B.  G40 
10  Pick.  415 
Willcs,  2G1 
7  Biss.  156 
17  La.  500 


.     .     613 
.     .     100 
.   144,  n.  19 
.     .     .     225 
,  5GG,  017,  032 
...     113 
...     435 
...     709 
...     335 
249,  250,  272 
236,  265,  274,  287 


Ido  V.  Pierce 

Ikin  I".  Bradley 

Illinois  Trust  &  Savings  Bank  Case. 
Indiana  National  Bank  v.  llollsclaw 

Indig  V.  City  Bank 

Ingham  v.  Primrose 

Ingraham  v.  Maine  Bank     .     .     .     . 
V.  Speed 


Inhabitants  of  Farmington  v.  Stanley 
Innerarity  v.  IMcrchants'  Nat.  Bank  . 

Innes  i'.  Stephenson 

In  re  Agra  &  Masterman's  Bank 

Bank  of  Madison      .... 

Bank 

Beaks  Estate 

Brown 

Carew 

Duryea 

East  of  England  Banking  Co. 

Empire  City  Bank    .... 

European  Bank 

Farnsworth,  Brown,  &  Co.     . 

Franklin  Bank 

Grant 

Gross 

HoUister  Bank 

Howe      

King 

Manufacturers'  Nat.  Bank     . 

Medewe 

North 

Norwich  Yarn  Co 

Oliver  Lee  &  Co.'s  Bank  .     . 

Powell's  Trusts 

Reciprocity  Bank     .... 

Tallassee  &  Co 

United  Service  Co 


134  Mass.  204 610 

5  Price,  536 309 

21  Blatchf.  275 589 

98  Ind.  87 395,  474 

80  N.  Y.  100  .  .  .  230,  272,  557,  507 

7C.  B.  N.  s.  82 445 

13  Mass.  208   .  , 27 

3  Miss.  410 74 

GO  Me.  472 38 

139  Mass.  332 136 

1  M.  &  Rob.  145 435 

36  L.  J.  Ch.  151  ....   289,  568 
5  Biss.  575  ..  .  573,  589,  II.  150,  c 

100  U.  S,  446 II.  150 

13  L.  R.  Eq.  734 550 

2  Story  C.  C.  512  .  389,  459,  460,  495 
31  Beav.  39 134 

17  Nat.  Bank.  Reg.  495  .  .  II.  108,  / 

4  L.  R.  Ch.  14 425 

18  N.  Y.  199   675,  676,  679,  691,  693 
8  L.  R.  41 327 

5  Biss.  223 324 

1  Paige,  249 186,  289,  574 

7  Moore  P.  C.  141 125 

G  L.  R.  Ch.  632 827 

27  N.  Y.  393 693,  694 

1  Paige,  214 56,  76 

8  Nat.  Bank.  Reg.  (Ga.)  285  .  .  394 

5  Biss.  499 II.  143,  146 

26  Beav.  588 325 

16  N.  B.  R.  (Mass.  Dist.)  420  .  .  337 

22  Beav.  143 440  B 

21  N.  Y.  9 676 

1  Johns.  49,  5  Jur.  N.  s.  331  .  .  606 

22  N.  Y.  9 656,  679,  687 

G4  Ala.  595 324 

6  L.  U.  Ch.  212   ....  102,  n.  26 


TABLE   OF    CASES.  xlix 

[All  references  are  to  Sections.] 

In  re  Willi 11  Blatchf.  243" 11.130 

Williams 3  Jr.  Eq.  34G 324 

Insurance  Co.  v.  Connor 17  Pa.  ISt.  136 43 

International  Bank  v.  German  Bank     .     3  Mo.  App.  3G7 51,  374 

V.  Jones 15  Brad.  594 445 

V. 9  N.  E.  885  (111.) 334 

Irish  V.  Nuttins 47  Barb.  370 611 

Irons  y.  Manufacturers' Nat.  Bank     .     .     0  Biss.  301 11.146 

V. 21  Fed.  Rep.  197    ....      II.  112  i 


Manufacturers'  Nat.  Bank  of 


Chicago 17  Fed.  Rep.  308    ...     .      II.  112  b 

Irvine  v.  Lowry 14  Pet.  293 46 

Irving  Bank  v.  Wetlierald 36  N.  Y.  335 155,  413,  419 

Irwin  V.  Lumberman's  Bank    ....    2  Watts  &  S.  190 113 

Island  City  Savings  Bank  r.  Sachtleben     3  S.  W.  733  (Tex.) 320 

Israel  v.  Bowery  Savings  Bank   ...     9  Daly,  507 620 

Ivory  V.  Bank  of  State  of  Missouri   .    .     36  Mo.  475 252,  383 


J. 

Jacks  V.  Darrin .     .    .    3  E.  D.  Smith,  557 398 

Jackson  v.  Bank  of  United  States     .     .     10  Pa.  St.  61 113,  343 

y.  Brown 5  Wend.  590 74 

V.  Union  Bank 6  Har.  &  J.  146 .     .     .     .  270,  274,  287 

Jackson  Ins.  Co.  v.  Cross 9  Heisk.  283 181 

Jackson  Marine  Ins.  Co.  Matter  ...    4  Sandf.  Ch.  550 760 

Jacob  V.  First  National  Bank   ....  Ham.  Co.  Dist.  Ct.,  3  Bull.  274  .     511 

Jacobsohn  r.  Belmont 7  Bosw.  14 242 

Jameson  v.  Swinton 2  Taunt.  225 45 

Jarvis  v.  Rogers 15  Mass.  389 567 

Jassoy  V.  Horn 64  111.  379 309 

Jefferson  v.  Holland 1  Del.  Ch.  116 662 

Jefferson  Co.  Bank  v.  Chapman    ...  12  Johns.  322    ....  640,  641,  644 

Jenkins  v.  Fowler 63  N.  H.  244 606 

V.  National  Village  Bank  ...     58  Me.  275 211 

Jenys  v.  Fowler 2  Str.  946 463 

Jessop  V.  Miller 1  Keyes,  32 599 

Jeune  v.  Ward 2  Stark.  326 409 

John  V.  City  National  Bank  of  Selma    .     57  Ala.  96 233 

Johns  V.  Mason 9  Hare,  29 395  A 

Johnson  v.  Catlin 27  Vt.  89,  1  Williams,  87    .     .   95,  170 

V.  Fanners'  Bank 1  Harr.  117 113,  295,  322 

V.  First  National  Bank  ....     6  Hun,  124 248 

V.  Frankfort  Bank 23  Me.  322 27 

y.  Harth lBaiL485  (S.  C.) 228 

V.  Henderson 76  N.  Car.  227 299 

V.  Laflin 103  U.  S.  800, 

17  Alb.  Law  Jour.  145      713,  II.  112 

V.  National  Bank  of  Gloverville  .    74  N.  Y.  329 II.  130  c 

V.  Robarts L.  R.  10  Ch.  App.  505    ...     .     598 

r.  Tully 60Ga.  540 643 

VOL.  I.  d 


1  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Johnson  r.  "Way 27  Oliio  St.  374 565 

V.  Windle 3  Bing.  New  H.  225 480 

Johnston  ;•.  Frankfort  Rank      ....     23  INIe.  322 27 

V.  Southwestern  11.  K.  Bank  .     .  3  Strobh.  Eq.  203  ....      CG9,  692 

Johnston  Bros.  i-.  Cliarlottesville   Nat. 

Bank 3  Iluglies,  657 47,  65,  749 

Jones  V.  Brown 34  N.  H.  439 611 

i;.  Fales 4  Mass.  202.     .     .     9,  n.  19,  9  A,  220 

r.  Hawkins 17  Ind.  550 744 

V.  llciliger 30  Wise.  149 421 

I'.  Loeke L.  E.  1  Ch.  App.  25 551 

f.  Manufaeturers' Bank    ....     10  Wk.  No.  Cas.  102 329 

f.  Milliken 41  Pa.  251 002 

V.  Nicholay 2  Robt.  288 554 

r.  Pcppereorne 5  Jur.  n.  s.  140 324 

V.  Rytle 5  Taunt.  488     ....  289,  470,  480 

Wiltberger 42  Ga.  575 687,  093 

Jordan  v.  Ilarloek 84  Pa.  366 388 

V.  Nat.  Siioe  &  Leather  Bank     .     74  N.  Y.  473 329,  561 

Jose  V.  Hewett 50  Me.  248 21 

Jourdaine  v.  Lefevre 1  Esp.  N.  P.  66 324 

Joy  V.  Campbell 1  Sch.  &  Lef.  346  ...     .      324,  326 

Judy  V.  Farmers  &  Traders'  Bank     .     .     81  Mo.  404 180,  208,  325 

Jung  c.  Second  Ward  Savings  Bank      .     55  Wise.  304 395 

Justh  V.  National  Bank 50  N.  Y.  478      ....  493,  524,  567 


K. 

Kahnwoiler  r.  Anderson 78  N.  C.  133 506 

Kansas  Lumber  Co.  r.  Central  Bank    .     34  Kans.  635 454 

Kansas  Valley  Nat.  Bank  of  Topeka  ?•. 

Rowell • 2  Dillon  C.  C.  371      ....    II.  128 

Kean  v.  Johnson 1  Stockt.  401 721 

Keane  v.  Roberts 4  Mass.  332,  357 317 

Kearney  r.  King 2  Barn.  &  Aid.  301 366 

Keen  v.  Davis 21  N.  J.  Law,  083 365 

Keene  v.  Beard 8  C.  B.  n.  s.  372     .    378,  380,  ,391,  393, 

414,  495,  529 

I'.  Collier 1  Met.  417  (Ky.)   .     183,190,567,574 

Kekewich  I'.  Manning 1  DeG  M.  &  G.  176  .     .     .      010,615 

Kelley  v.  Newburyport  Horse  R.  R. .     .     141  Mass.  496 101 

Kelly  V.  Brown 5  Gray,  108 388 

V.  Roberts 40  N.  Y.  482 346 

Kelly  &  Co.  v.  Phelan 5  Dill.  228 337 

Kelsey  v.  Nat.  Bank  of  Crawford      .     .     09  Pa.  St.  420 II.  144 

Kelty  V.  Second  Nat.  Bank 52  Barb.  328 421,  544 

Kemble  v.  Mills 1  M.  &  G.  757 380 

Kenistons  f.  Sceva 54  N.  H.  37 549,011,612 

Kennebec,  &c.  R.  Co.  v.  Kendall  ...     31  Me.  470 43 

Kennedy  y.  Gibson 8  Wall.  505  .      11.112  6,150,156,157 

V.  Otoe  Co.  Nat.  Bank  ....    7  Neb.  65 103,  145,  108 


TABLE   OF    CASES.  H 

[All  references  are  to  Sections.] 

Kent  V.  Dawson  Bank 18  Blatchf.  237 272,  280 

Kenyon  v.  Stanton 44  Wise.  479 421,  n.  11 

Kermeyer  v.  Newby 14  Kans.  1(54 544 

Key  V.  Knott 9  Gill  &  J.  042 636 

Keyser  v.  Hitz 2  Mackey,  513  (D.  C.)    ....       14 

Kilgore  v.  Bulkey 14  Conn.  302 51,  298 

Kilsby  V.  Williams 5  Barn.  &  Aid.  815     ..     .      409,  572 

Kirnbal  v.  Cleveland 4  Midi.  GOG 158 

V.  Leland 110  Mass.  325 612 

V.  Norton 59  N.  H.  1 609,  620 

Kimbo  V.  Bank  of  Fulton 49  Ga.  419 643 

Kimins  v.  Boston  Five  Cents   Savings 

Bank 141  Mass.  33 620 

Kimraird  v.  Webster 10  Ch.  D.  139 180 

King  V.  Birmingham 8  Barn.  &  Cr.  29 754 

r.  Dedham  Bank 15  Mass.  447 644 

V.  Elliott 5  Sm.  &  Mar.  447 672 

Kingman  v.  Perkins 105  Mass.  Ill 506,  612 

Kirk  V.  Blurton 9  Mees.  &  Wels.  284 439 

Kirkpatrick  I'.  McCullough 3  Humph.  171 299 

Kirtland  v.  Moore 40  N.  J.  Eq.  106 511 

Klanber  v.  Biggerstaff 47  Wise.  551 299 

Kleekamp  i'.  Meyer 5  Mo.  App.  444 424 

Klopp  V.  Lebanon  Bank 46  Pa.  St.  88 699,  703 

Knatchbull  v.  Hallett 13  Ch.  D.  096    .     .     .     .  326,  355,  589 

Knecht  v.  U.  S.  Savings  Inst 2  Mo.  App.  563 329 

Kniglit  y.  Old  National  Bank    ....  4  Am.  Law  Times  Rep.  240    .    11.112 

Knights  V.  Wiffin Law  Rep.  5  Q.  B.  660    .     .     .     .    478 

Knowles  v.  Beatty 1  McLean,  41 71 

Knox  V.  Clifford 88  Wise.  651 565,  n.  15 

Kobbi  V.  Underbill 3  Sandf.  Ch.  277 544 

Koehler  v.  Adler 91  N.  Y.  657 547 

Kohler  v.  Black  River  Falls  Iron  Co.    .    2  Black,  721 125 

Kost  V.  Bender 25  Mich.  516 565 

Kuhn  V.  Frank 10  Rec.  022,  Hamilton  Co.  Dist. 

Ct.  (Oh.) 457 

Kuhns  V.  Westmoreland  Bank      ...    2  Watts,  136 662,  703 

Kyle  f.  The  Mayor,  &e 75  N.  C.  445 11141^ 

Kymer  v.  Laurie 18  L.  J.  Q.  B.  218 .     .     .    .      459,  550 


L. 

La  Due  v.  First  Nat.  Bank  of  Kasson    .  81  Minn.  33 441 

Lackey  r.  Miller Phill.  N.  C.  L.  26 642 

Laclede  Bank  r.  Schuler 120  U.  S.  511     .     .     .     .493,511,514 

Lafayette  Bank  v.  State  Bank      ...  4  McLean,  208 156 

Lamb  v.  Cecil 25  W.  Va.  288,  28  Id.  659  .     .  158, 165 

Lamberton  v.  Merchants'  Nat.  Bank  of 

Winona 24  Minn.  281 346  A 

Lamoille  Co.  Nat.  Bank  v.  Bingham      .  50  Vt.  105 II.  130  / 

Lancaster  Bank  v.  Smith 12  P.  F.  Smith,  54     .     .     .      191,  204 


lii  TxVBLE    OF    CASES. 

[All  references  are  to  Sections.] 

Lancaster  Bank  v.  Woodward  ....  18  Pa.  St.  357  .      9,  357,  442,  443,  553 

Lancaster  National  Bank  v.  Taylor  .     .     100  Mass.  18 482,  486 

Lane  v.  Bailey 47  Barb.  305 325 

t?.  Bank  of  West  Tennessee  .     .     .    9  Ilcisk.  419 231 

I'.  Morris 10  N.  Y.  1G2 .     .     .     675,  687,  689,  6'J6 

Lanfear  v.  Blossman 1  La.  An.  148 225 

Langdale  v.  Whitfield 4  K.  &  J.  420,  27  L.  J.  Ch.  795    .     606 

Langton  v.  Lazarus 5  M.  &  W.  629 481 

Latlirop  y.  Commercial  Bank  of  Scioto     8  Dana,  119 46 

Laubach  v.  Leibert 87  Pa.  St.  55 511 

Laughlin  v.  Marshall 19  111.  390 61,  298,  299 

Lawler  v.  Burt 7  Ohio  St.  340 666 

Lawrence  v.  American  Nat.  Bank     .     .     54  N.  Y.  435 464 

V.  Bank  of  Republic 35  N.  Y.  320 326,  346 

V.  Fox 20  N.  Y.  268 512 

V.  Gubhard 41  Barb.  575 98,  n.  27 

f.  Nelson 21  N.  Y.  158 339 

V.  Sclmiidt 35  111.  440     .. 447 

V.  Stonington  Bank 6  Conn.  521  .     .     .     250,  274,  287,  601 

Laws  V.  Rand 3  C.  B.  n.  s.  442     .     .     .  378,  421,  n.  9 

Lawson  v.  Lawson IP.  Wms.  441 550 

Lazarus  r.  Shearer 2  Ala.  718 365 

Lazearr.  Nat.  Union  Bank  of  Maryland     52  Md.  78 61,  IL130^- 

Le  Rose  v.  Logansport 102  Ind.  3-32 36 

Leach  v.  Buchanan 4  Esp.  226 468 

i;.  Hale 31  Iowa,  69 190,  IL  1086 

V.  Perkins 17  Me.  402 424 

Leas  V.  Walls 101  Pa.  St.  57 485 

Leather  !.-.  Simpson L.  R.  11  Eq.  398 225 

Leather  Manufacturers' Bank  t'.  Morgan     117  U.  S.  96 290,472 

Leavitt  y.  Beers Hill  &  D.  221 149 

V.  Fisher 4  Duer,  1 144,  n.  22,  713 

V.  Palmer 3  Comst.  19 51,  298,  745 

V.  Yates 4  Edw.  Ch.  134      63,  77,  98,  n.  36,  090 

Leazure  v.  Ilillegas 7  Serg.  &  R.  313 754 

Lebanon  Bank  v.  Morgan 28  Pa.  452 299 

Lebanon  Nat.  Bank  v.  Karmany    ...     98  Pa.  St.  65 II.  130,  n.  58 

Leftley  v.  Mills 4  T.  R.  175 450 

Legard  v.  Hodges 1  Vesey,  477 576 

Leggett  r.  Bank  of  Sing  Sing  .     .     .     .    24  N.  Y.  283 098,702 

V.  N.  J.  Manufacturing  &  Bank- 
ing Co Saxt.  541 116,  144 

Legro  V.  Staples 16  Me.  252 496 

Lehman  v.  Tallassee  Manufacturing  Co.    64  Ala.  567 324 

Lemmon  r.  Box 20  Tex.  329 408 

Lening  v.  Ralston 23  Pa.  St.  139 12,  n.  18 

Lenox  v.  Cook 8  Mass.  400 227 

Lesassier  v.  Kennedy 30  La.  An.  639 081 

Lester  v.  Howard  Bank 33  Md.  558 125,  751 

Lester  &  Co.  v.  Given,  Jones,  &  Co.  .     .  8  Bush,  357  (Ky.)      .     .  373,  494,  532 

Lett  V.  Morris 4  Sim.  607 495,  541 

Levi  V.  National  Bank 5  Dill.  104 247,  248,  568 

Levy  V.  Bank  of  America 24  La.  An.  220 474 


TABLE   OP    CASES.  liii 

[All  references  are  to  Sections.] 

Levy  V.  Bank  of  United  States     ...  1  Binn.  27      .      171,  463,  466,  488,  569 

V.  Franklin  Savings  Bank     ...     117  Mass.  448 620 

V.  National  Bank 7  Cent.  L.  J.  249 9,  n.  9 

V.  Peters 7  Serg.  &  R.  125 425 

V.  Pike 25  La.  An.  630 200 

V.  Pyne Car.  &  M.  453 440 

Lewis  V.  Eastern  Bank 32  Me.  90 119,  295 

V.  International  Bank   ....     13  Mo.  App.  207 400 

I'.  Park  Bank 42  N.  Y.  463 440  A 

V.  Peck  &  Clark 10  Ala.  142 267 

V.  Robertson 13  Sm.  &  Mar.  558     ..     .      608,  670 

Libby  v.  Hoppins 104  U.  S.  307 5(37 

V.  Union  National  Bank     ...     99  111.  622 95 

Liggett  Spring  &  Axle  Co.'s  Appeal      .     Ill  Pa.  St.  291  .     .  ' 333 

Lilly  V.  Hays 5  Ad.  &  El.  548      ....      398,  408 

Lime  Rock  Bank  v.  Hewett     .     .     .     .  52  Me.  531    .     .     .     .  9,  n.  19,  103,  167 

V.  Macomber 29  Me.  564 98,  n.  22,  101 

V.  Plimpton 17  Pick.  161 565,  566 

Lincoln  &  Kennebeck  Bank  v.  Page      .  9  Mass.  155   .     .  9,  n.  19,  9  A,  9  B,  220 

V.  Richardson 1  Greenl.  79 765 

Lindauer  v.  Fourth  National  Bank    .     .     55  Barb.  75 599 

Lindeman  r.  Desborough 8  Barn.  «&  Cr.  586 21 

Lindsay  v.  Lord  Downes 2  Ir.  Eq.  307 41 

V.  National  Bank  of  Monticello  .     12  Bush,  287 IL  106  a 

V.  McClelland 18  Wise.  481      ....     51,  298,  299 

Linville  v.  Welch 29  Mo.  203 421 

Lionberger  v.  Rouse 9  Wall.  468 II.  141  b,  y 

Litchfield  Bank  v.  Church 29  Conn.  137 669,  670 

V.  Peck 29  Conn.  384 565,  n.  1  a 

Little  V.  O'Brien 9  Mass.  94 752 

V.  Phoenix  Bank 2  Hill,  N.  Y.  425    .     274,  393,  421,  422 

Lloyd  V.  Sandilands Gow.  13 391,  393,  552 

V.  West  Branch  Bank   .     .     .     .  15  Pa.  St.  172    .     98,  n.  26,  102,  n.  29, 

103,  191 

Loan  Association  v.  Stonemetz    ...     29  Pa.  St.  534 140 

Lobdell  V.  Baker 1  Met.  193 477 

Locke  V.  Prescott 32  Beav.  261 326 

Lock  wood  r.  American  National  Bank  .     9  R.  L  308 124,  II.  112 

Lodge  V.  Phelps 1  Johns.  Cas.  139    ...     .    12,  n.  13 

Loeb  V.  Weiss 64  Ind.  285 499 

Lohman  v.  N.  Y.  &  Erie  R.  R.  Co.    .     .     2  Sandf.  39 98,  n.  26 

London  &  Co.  Banking  Co.  v.  Ratcliffe  .  L.  R.  6  App.  Cas.  722    ...     .     331 

Long  V.  Strauss 107  Ind.  94 297,  298 

Longman  v.  Barry 6  Ir.  R.  C.  L.  457 359 

Loomis  V.  Eagle  Bank Disney,  285 103,  134,  1.36 

V.  Simpson 13  Iowa,  532 275 

Loring  v.  Brodie 134  Mass.  453 166 

Loud  V.  Hall 106  Mass.  414 9,  n.  3 

Louisiana  Bank  i-.  Bank  of  U.  States    .     7  Mart.  398 652 

Louisiana  Ice  Co.  v.  State  Nat.  Bank    .     1  McClain,  185 585 

Louisiana  Nat.  Bank  v.  Citizens'  Bank  28  La.  An.  189  .     .     .     414,  n.  20,  482 

Louisiana  State  Bank  v.  Rowell  ...     6  Mart.  506 233 

V.  Senecal 13  La.  525 134 


liv  TABLE   OP   CASES. 

[All  refereuces  are  to  Sections.] 

Louisville   National   Bank   r.  Brannin, 

Loring,  &  ilarvey 82  Ky.  370 128,  n.  21 

Lovett  V.  Cornwell U  Wend.  309 398 

V.  Steam  Saw  Mill  Association  .     (!  I'aige,  54 165 

Loving  V.  Brodie 134  Mass.  4G9 317 

Lowe  V.  Lehman 15  Oliio  St.  179 9,  n.  19 

Lowry  v.  Muirell 2  Port.  286  (Ala.) 662 

Loyd  f.  Freshfield 2  Car.  &  P.  325 294 

V.  JlcCaffrey 40  Pa.  St.  410 403,  526 

Lucas  V.  Dorrien 7  Taunt.  278,  1  Moore,  29  .     .     .     324 

V.  Governor's  National  Bank  of 

Pottsville 78  Pa.  St.  228 II.  130 

Luff  r.  Pope 6  Hill,  413 493,502 

Lumbard  v.  Aldrie 8  N.  H.  34 46 

Lumley  v.  Palmer Strange,  1000 408 

Lund  V.  Seamen's  Bank 37  Barb.  129 317 

Lunt  y.  Bank  of  Nortli  America    .     .     .     49  Barb.  221 493 

Lyman  f.  United  States  Bank  .     .     .     .     12  How.  225 137 

Lynch  v.  Goldsmith 64  Ga.  42 299 

V.  National  Bank  of  W.  Virginia     22  W.  Va.  554 IL  1305r 

Lyndeboro'GlassCo.v.  Mass.  Glass  Co.     Ill  Mass.  315 101 

Lyon  V.  Jerome 26  Wend.  485 117 

Lyons  v.  Culbertson 83  111.  33 9,  n.  12 

V.  Lyons  National  Bank     ...     19  Blatchf.  279 II.  128 


M. 

Mabey  v.  Adams 3  Bosw.  346 132 

Mabie  v.  Bailey 95  N.  Y.  20G 610 

V.  Johnson 15  N.  Y.  S.  Ct.  309 565 

MacGregor  v.  Rhodes 6  El.  &  B.  206 477 

Macartney  v.  Graham 2  Sim.  285 649 

Macbean  v.  Irvine 4  Bibb,  17 144 

Mackersy  v.  Ramsay 9  Clark  &  F.  818    ..     .  249,  272,  277 

Mackintosh  i-.  Eliot  National  Bank  .     .     123  Mass.  393 470 

Maclaren  v.  Stanton 16  Beav.  270 46 

Maconiber  v.  Doane 2  Allen,  641 506 

Macungie  Savings  Bank  r.  Hottenstein     89  Pa.  St.  328 11.130/ 

Madison   &  Indianapolis  R.  R.  Co.  v. 

Norwich  Saving  Soc 24  Ind.  457 89,  98,  n.  36 

Magee  r.  Carmack 13  111.  289 489 

Magruder  L'.  Colston 44  Md.  349 ll.loOd 

Magwood  i.-.  Southwestern  R.  R.  Bank  .     5  Rich.  L.  379 714 

Mahaiwe  Bank  v.  Douglas 31  Conn.  170     .    9,  n.  9,  221,  480,  484, 

485,  486 

Maher  v.  Brown 2  La.  492 496 

Mahony  v.  East  Ilolyford  Mining  Co.    .     33  Law  T.  383 440 

Main  i'.  Second  National  Bank      ...     6  Biss.  26 11.  157 

]Maine  Bank  v.  Butts 9  Mass.  49 300 

Maitland  v.  Citizens'  Nation.al  Bank      .     40  Md.  540 565,  600 

Malcolm  v.  Scott 5  Exch.  601 398,  408,  005 


TABLE    OF    CASES.  Iv 

[All  references  are  to  Sections.] 

Mallett  V.  Simpson 94  N.  C.  37 56 

Manchester  Bank  v.  Fellows    ....    28  N.  PI.  302 223 

Mandeville  v.  Union  Bank 0  Cranch,  9 557,  558 

y.  Welch 5  Wheat.  286     .493,494,502,528,550 

Manliattan  Co.  v.  Lydig 4  Johns.  377  .      98,  n.  20,  179,  291,  295 

Mann  v.  Mann 1  Johns.  Ch.  231 606 

V.  Pentz 2  Sandf.  Ch.  259 671 

V.  Second  Nat.  Bank  of  Springfield  30  Ivans.  412,  34  Id.  746      .      135,  603 

Manning  v.  McClure 36  III.  489 5G5 

V.  Purcell 1  Sra.  &  G.  284 606 

r.  Westerne 2  Vern.  606 327 

Manningford  v.  Toleman 1  Coll.  670 326 

Manufacturers   &  Mechanics'  Bank   v. 

Gore 15  Mass.  75 544 

Manufacturers' Bank  y.  Perry.     .     .     .     144  Mass.  313 454 

Manufacturers' National  Bank  y.Baack     8  Blatchf.  149 11.157 

V.  Barnes 65  111.  69 291,  4G3,  467 

V.  Thompson 129  Mass.  438 351 

Mapes  V.  Scott 88  111.  352 II.  128 

y.  Second  Nat.  Bank  of  Titusville     80  Pa.  St.  163 103 

Marine  Bank  v.  Biays 4  Har.  &  J.  338 716 

V.  Birney 28  111.  90 312 

V.  Chandler 27  111.  525 191,  312 

V.  Clements 3  Bos.  600 158 

V.Fulton  Bank 2  Wall.  252    247,248,289,493,567,568 

V.  Ogden 29  111.  248 312,  447 

V.  Rushmore 28  111.  463 248,  312,  568 

y.  Smith 18  Me.  99 231 

Marine  National  Bank  v.  City  National 

Bank 59  N.  Y.  71    .  414,  n.  16  &  17,  480,  482 

Market  v.  Hartshorne 3  Keyes,  137 569 

Market  Street  Bank  v.  Stumpe     ...     2  Mo.  App.  545 37 

Markle  v.  Hatfield 2  Johns.  455       ....  289,  659,  662 

Marlborough  Manuf.  Co.  v.  Smith    .     .     2  Conn.  544 712 

Marr  v.  Bank  of  West  Tennessee     .     .  4  Lea,  578     ..     .     671,  672,  673,  691 

Marrett  v.  Brackett 60  Me.  527 424,  544 

Marsh  v.  Fulton  Co 10  Wall.  676 43 

V.  Oneida  Central  Bank     ...  34  Barb.  298      .  289,  324,  559,  560,  568 

Marshall  v.  American  Express  Co.    .     .     7  Wise.  1 45 

Marston  v.  Marston 21  N.  H.  491 608 

Martin  v.  Bank  of  United  States  ...  4  Wash.  C.  C.  253      .     .  649,  050,  651 

V.  Funk 75  N.  Y.  134 610,  615 

V.  KunzmuUer 37  N.  Y.  396 329 

V.  Mechanics'  Bank 6  Har.  &  J.  235 502 

V.  Morgan 3  Moore,  635 389,  449 

V.  Webb  .     .     .     • 110  U.  S.  7 133,  171 

Marvin  v.  Ellewood 11  Paige,  365 342 

Marvine  v.  Hymers 2  Kern.  223 156 

Marzetti  y.  Williams 1  Barn.  &  Ad.  415      311,458,459,507 

Mason  v.  Dousay 35  111.  424 12,  n.  13 

V.  Hunt 1  Dougl.  297 225 

Massachusetts  National  Bank  v.  Bullock     120  Mass.  86 346  A 

Master  v.  Miller 4  T.  R.  320 481 


hi  TABLK    OF    CASES. 

[All  references  are  to  Sections.] 

Matliew  r.  SherwcU 2  Taunt.  439 400  A 

ISlathews  r.  Massachusetts  Nat.  Bank   .  1  Holmes,  ii'M 159 

r.  Skinner 62  Mo.  o20 75,  II.  128 

Mauran  v.  Lamb 7  Cow.  174 393 

Maurv  i:  Covlc 34  Md.  235 203 

1  1-.  Ingraliam 28  Miss.  171 652,  761 

Mav  r.  Lc  Claire 11  Wall.  217 505,  n.  1 

Mayall  v.  Boston  &  Maine  R.  R.  Co.     .  19  N.  II.  122 98 

Mayer  v.  Chattahoochee  Nat.  Bank  .     .  51  Ga.  325 185,  605 

V.  Hartranft 28  Fed.  Kep.  358 489 

,,.  Mode 14  Hun,  155 389 

Mayhew  r.  Eames 3  Barn.  &  Cr.  GOl 104 

Jla'ynard  v.  Bank 1  Brewster,  483 II.  144 

V.  Maynard 49  Vt.  299 21 

V.  Newman 1  Nev.  271 192 

Mayor  v.  Johnson 3  Camp.  324 050 

V.  Thomas 5  Cold.  600 II.  141  / 

Mayor  of  Colchester  r.  Lowten     .     .     .  2  Kent  Com.  280, 1  Ves.  &  B.  226       62 
Mavor  of  Macon  v.  First  National  Bank 

of  Macon 59  Ga.  648 II.  141  o 

McAllister  v.  Commonwealth  ....  SO  Pa.  536 590 

McBrides  v.  Farmers'  Bank      ....  26  N.  Y.  450 599 

]SIcCa-g  V.  Woodman 28  111.  84 559,  560 

McCall  V.  Byram  Manufacturing  Co.    .  6  Conn.  420 46 

McCardee  v.  Orphan  Asylum  Society  .  9  Cowen,  437 55 

McCarty  r.  Roots 21  How.  432 565,  600 

McCormick  v.  Trotter 10  Serg.  &  R.  94 299 

McCrath  v.  Nat.  Moliawk  Valley  Bank  10  N.  E.  862 78 

McCullough  V.  Annapolis  R.  R.    .     .     .  4  Gill,  68 43 

McCurdy's  Appeal 65  Pa.  St.  29 12 

McDougal  V.  Bellamy 18  Ga.  411     45,  121,  656,  690,  092,  758 

V.  Lane 18  Ga.  444 656,  6G9,  687 

McDowell  V.  Bank  of  Wilmington    .     .  1  Ilarr.  369   ....   9,  324,  502,  698 

McEwen  v.  Davis 39  Ind.  11 313,  342 

McFadden  v.  Jenkins 1  Hare,  458 610 

V.  Wilson 90  Ind.  253 506 

l\IcGill  V.  Bank  of  United  States  ...  12  Wheat.  511 33 

McGirr  v.  Aaron 1  Pa.  49 76 

McGough  V.  Jamison 107  Pa.  St.  336 302,  322 

McGrade  v.  (ierman  Savings  Institution  4  Mo.  App.  330 522 

McGrath  (\  Reynolds 116  Mass.  566 615 

McGregor  v.  Loomis 1  Disney,  247 311,  494 

McGuiro  v.  Grant 1  Dutch.  317 102,  n.  13 

McHugh  V.  County  of  Schuylkill      .     .  67  Pa.  St.  391 468 

Mclndoe  v.  City  of  St.  Louis    ....  10  Mo.  577 754 

Mcintosh  r.  Lytle        20  Minn.  .330 370 

Mclver  v.  Robinson 53  Ala.  450 II.  141  j 

McKelroyi'.  Southern  Bank  of  Kentucky  14  La.  An.  458 466 

McKinster  v.  Bank  of  Utica     ....  9  Wend.  46,  11  Id.  473   .  232,  251,  252 

McLain  v.  Wallace 103  Ind.  562 18fi,  210,  568 

McLaren  v.  Pennington 1  Paige,  102 3-38 

McLean  v.  Eastman 21  Hun,  312 708 

i;.  Lafayette  Bank o  McLean,  587  .     .    9,  n.  9,  50,  73,  704 


TABLE   OP   CASES.  Ivii 

[All  references  are  to  Sections.] 

McLemore  v.  Louisiana  State  Bank      .     91  U.  S.  27 IL  108/ 

McLeod  1-.  Druinmond 17  Ves.  Jr.  153 317 

V.  Evans 28  N.  W.  Rep.  173     .     .   248,  5G7,  568 

McManus  v.  Crickett 1  East,  lOG 102,  n.  9 

McMasters  v.  Pennsylvania  R.  Co.  .     .    69  Pa.  St.  374 0,  n.  7 

McVeigh  u.  City  of  Chicago     ....     49111.318 11- 141  j 

Mc  Williams  v.  Webb 32  Iowa,  577 492,  541 

Meach  v.  Meach 24  Vt.  591 550 

Meacher  u.  Fort 3  Hill,  S.  C.  227 476 

Mead  v.  Engs 5  Cow.  303 232 

V.  Young 4  T.  R.  28 474,  480 

Meadow  v.  Dollar  Savings  Bank  ...     56  Ga.  605 302 

Meads  v.  Merchants'  Bank 25  N.  Y.  143      ...     155,  414,  n.  14 

Mechanics  &  Farmers' Bank  r.  Smith  .     19  Johns.  115 291 

Mechanics  &  Traders'  Bank  v.  Dakia  .  50  Barb.  593      ..;....    346 

V.  Debolt 1  Ohio  St.  591 6 

Mechanics'  Bank  v.  Bank  of  Columbia  5  Wheat.  326     .     .  70,  102,  n.  21,  1-54, 

156,  744 

r.  Crow 60  N.  Y.  85 565 

v.  Earp 4  Rawle,  384      224,  249,  250,  269,  274, 

283,  290,  702,  703,  704 

v.  Levy 3  Paige,  606 360 

V.  Mercliants'  Bank  .     :     .     .     .     6  Met.  13 226,  256,  299 

V.  Seton 1  Pet.  299 13.3,  699 

V.  Straiton 3  Keyes,  365 370 

V.  Valley  Packing  Co 4  Mo.  App.  200      ....      217,  593 

Mechanics' Banking  Association  v.  New 

York  &  Saugerties  Lead  Co.     .     .     .  23  How.  Pr.  74,  35  N.  Y.  505  .     .     98, 

n.  34,  158 

Meighen  v.  Bank 25  Pa.  St.  288 113,  295 

Meisser  v.  Tliompson 9  111.  App.  ,368 693,  696 

Mellen  v.  Wliipple 1  Gray,  321 499 

Melville  v.  Doidge 6  C.  B.  450 26 

Mercantile  Bank  v.  McCarthy      ...     7  Mo.  App.  318 171 

V.  New  York 121  U.  S.  138 II.  141  y 

Merchant  v.  Merchant 2  Bradf.  432 611 

Merchants  &  Farmers'  Bank  of  Char- 
lotte V.  Meyer 74  N.  C.  514 II.  130  h 

Merchants  &  Manufacturers'  National 

Bank  v.  Stafford  National  Bank    .     .  44  Conn.  564,  U.  S.  Dist.  Ct.  .     .     252 
Merchants  &  Planters'  National  Bank 

V.  Trustees  of  Masonic  Hall  ....     65  Ga.  603 IL  143 

Merchants'  Bank  v.  Cardoza    ....  3  Jones  &  S.  162    .     .     .     .    '.   II.  101 

V.  Central  Bank 1  Kelly,  418 154,  744 

V.  Cook 4  Pick.  405 716 

V.  Exchange  Bank  of  N.  Orleans     16  La.  457 479,  480 

V.  Jefferies 21  W.  Va.  504 173 

V.  Lassee 33  Mo.  350 49,  52 

v.  Livingstone 74  N.  Y.  223 103 

V.  Marine  Bank 3  Gill,  96 167 

V.  Rudolf 5  Neb.  527     ..     .      46,  137,  167,  168 

•  r.  Spicer 6  Wend.  445 393 

V.  State  Bank 10  Wall.  675      .     .    108,  152,  155,  161 


Iviii  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Merchants'  National  Bank  v.  Coates     .     79  Mo.  168 493,  522 

v.  Cook 95  U.  S.  o42 IL  152 

V.  Gumming Thompson's  Nat.  Bank 

Cas.  926 II.  141  h 

I'.  Eagle  National  Bank  of  Mass.  101  Mass.  281    ....  3.52,  404,  488 

r.  Glendon  Co 120  jVlass.  97 II.  106  a 

V.  Goodman 109  Pa.  422 236,  274,  282 

V.  Hanson 33  Minn.  40 593,  752 

V.  Mears 8  Eissel,  158 75 

r.  Nat.  Bank  of  Commonweultii  139  Mass.  573    .     .    349,  351,  352,  455 

r.  Ritzinger  et  al 118  111.  480,  20  111.  App.  20     .     .   329, 

369,  372,  375 

I'.  Bitzmayer 20  Bradley,  App.  29  .    .     .      494,  530 

V.  State  National  Bank      ...  10  Wall.  004      .   46,  51,  98,  n.  31,  152, 

153,  155,  158,  100,  171,  174,  298,  359, 
378,  402,  413,  414,  n.  16,  II.  108  g 

V.  United  States 101  U.  S.  1 II.  141  « 

Merriam  v.  Wolcott 3  Allen,  258 477 

Merrick  v.  Bank  of  the  Metropolis   .     .     8  Gill,  59 110,  120 

Merrill  v.  Shaw 38  Me.  267 688 

Mervin  v.  Butler 17  Conn.  138 45 

Metcalfe  v.  Bruin 12  East,  400 29 

V.  Williams 104  U.  S.  98 365 

Metropolitan  Bank  v.  Godfrey     ...     23  111.  579 74 

Metropolitan  National  Bank  v.  Loyd     .     90  N.  Y.  530 574,  589 

IMcyers  v.  Valley  National  Bank  ...  18  Nat.  Bankruptcy  Reg.  34  .     .      77 

Michener  e-.  Dale  ' 23  Pa.  St.  59 611 

Michigan  State  Bank  ?;.  Gardiner      .     .     15  Gray,  356 576 

Milburn  v.  State  of  Maryland  ....     1  Md.  1 42  c 

Milford  V.  Worcester 7  Mass.  48 754 

Millard  v.  National  Bank  of  Republic   .     3  McArthur,  54 474 

Miller  V.  Austen 13  How.  218  .     .     .       51,  289,  299,  300 

r.  Billingsly 41  Ind.  489 499 

«.  Burk 68N.  Y.  615 9,  n.  12 

V.  Dows 94  U.  S.  444 12 

V.  Farmers  &  Mechanics'  Bank    30  Md.  392 591 

V.  Mickel 12  Pacif.  Rep.  240 384 

V.  Miller 3  P.  Wms.  356 611 

V.  Race 1  Burr.  457 637,  654 

r.  Receiver  of  Franklin  Bank    .  1  Paige,  444       .     .     .     .338,343,641 

Milliken  v.  Sharpleigh 36  Mo.  599 592 

V.  Steiner 56  Ga.  251 98  a 

Mills  V.  Bank  of  United  States      ...  11  Wheat.  431  .      .    9,  n.  19,  221,  231, 

233 

V.  Barney 22  Cal.  240 299 

Millspaugh  r.  Putnam 16  Abb.  Pr.  380 610 

Milnes  v.  Dawson 5  Exch.  948 551 

Milroy  V.  Lord 4  DeG.  F.  &  J.  264 610 

Minet  r.  Gibson 1  H.  Bl.  569,  3  Term,  481   .     .     .     370 

Mining  Co.  v.  Anglo-California  Bank    .     104  U.  S.  192 358 

Minor  V.  Mechanics'  Bank 1  Pet.  46  .     24,  20,  30,  37,  42,  98,  102. 

171,  172,  6G9,  675 
V.  Rogers 40  Conn.  572 610 


TABLE    OF    CASES.  lix 

[All  refereuces  are  to  Sections.] 

Minturn  t'.  Fisher 4  Cal.  35   ....     381,382,383,387 

Missouri  River  Telegraph  Co.  v.  First 

National  Bank  of  Sioux  City     ...     74  111.  217 II.  130  b 

Mitchell  v.  Beckman 67  Cal.  117 322,  (387 

I,.  Cook 29  Barb.  243 lot) 

V.  Howe  Savings  Bank      ...    38  Hun,  257 020 

y  Walker         25  Inter.  Kev.  Record,  64   .     .    II.  157 

r'.Wilkins 33  N.  W.  910  (Minn.)     ....     302 

Mix  V.  National  Bank  of  Blooiuington  .     91  111.  20 14,  600 

Mobile  V.  Tuille 3  Ala.  144 43 

Mobley  r.  Clark 28  Barb.  390 227 

Mohawk  Bank  v.  Broderick     ....  10  Wend.  306,  13  Wend.  133,      9,  n.  9 

&  11,  243,  244,  3«9,  421,  n.  4  &  9, 
422,  425,  442 

Moise  V.  Chapman 24  Ga.  249 637 

Moniteau  National  Bank  v.  Miller     .     .     73  Mo.  187 11.  130,  n.  51 

Monongahela  National   Bank  v.  Over- 

holt 96  Pa.  St.  327 II.  130  i 

Montelins  v.  Charles 76  111.  303 421 

Montgomery  County  Bank  !•.  Albany 

City  Bank 3  Seld.  460 232,  272,  278 

V. 8  Barb.  399 409 

r.  Bank  of  State  of  New  York   .     3  Seld.  459 278 


Moody  v.  Mack 43  Mo.  210 421,  n.  15 

Moore  r.  Bank  of  Commerce    ....     52  Mo.  377 103 

V.  Bushell 27  L.  J.  Eq.  3 512,  564 

v,  Davis 57  Mich.  255      ....  493.  511,  521 

V.  Jones 3  Woods,  53      ....  680,  II.  112  a 

V.  Lowrey 25  Iowa,  336 495,  541 

V.  Meyer 57  Ala.  20 214,  594 

„.  Ryder 65  N.  Y.  441 565 

V.  Turberville 2  Bibb,  602 359 

0.  Waitt 13  N.  H.  415 231 

Moores  v.   Citizens'  National  Bank  of 

Piqua Ill  U.  S.  156 103 

Mordis  v.  Kennedy 23  Kans.  408 421,  544 

Morehouse  v.  Second  National  Bank  of 

Oswego 98  N.  Y.  503      ....  II.  130,  n.  56 

Moreland  v.  State  Bank 1  Breese,  205 159,  750 

Morgan  v.  Bank  of  North  America  .     .  8  Serg.  &  R.  73  .  9,  n.  11,  097,  698,  709 

V.  Bank  of  State  of  New  York  .     1  Duer,  434 474 

V.  Malleson L.  R.  10  Eq.  475 610 

V.  Merchants'  National  Bank  of 

Memphis 13  Lea,  234 103,  145 

V.  Tener 83  Pa.  St.  305 267,  285 

Morley  v.  Culverwell 7  M.  &  W.  178 380 

Morrell  v.  Wootten 16  Beaver,  197 407,  398 

Morrill  v.  Brown 15  Pick.  177       637 

V.  Raymond 28  Kans.  415 343 

Morris  v.  Edwards 1  Ham.  189 637 

Morris  Canal  &  Banking  Company  v. 

Van  Vorst 3  Zabr.  98 42 

Morrison  y.  Bailey 5  Ohio  St.  13    381,382,383,387,494,538 


Ix 


TABLE   OF   CASES. 


[All  references  are  to  Sections.] 


Morrison  v.  McCartney 

■  V.  Price 

Morse  v.  Ilodson 

V.  Massachusetts  National  Bank 


Morton  v.  Nailor     .     . 

?•.  Rogers     .     . 

Mortzenian  v.  Younkin 
Mosby  V.  Williamson  . 
Moses  V.  Franklin  Bank 
V.  Ocoll  Bank  . 


3  Mo.  183 421 

23  Fed.  Rep.  217    ...     .      U.  112  6 

5  :Mass.  314 19 

1  Holmes,  C.  C.  209   .     .  155, 157,  378, 
414,  425,  453 

5  Hill,  583 494,538 

14  Wend.  575 246 

27  Iowa,  ;J50 II.  141  c 

5  Heisk.  278 627 

34  Md.  574 493,  519 

1  Lea,  398 140,  719 


Mosse  V.  Salt 

Mott  V.  Havana  National  Bank 

i:  United  States  Trust  Co. 

Moule  V.  Brown 


32  Beav.  2G9 
22  Hun,  354 
19  Barb.  508 
4  Bing.  N.  C. 


Moultrie  v.  Hoge 

Mount  V.  First  National  Bank  .  .  . 
Mount  Holly  L.  &  M.  Turnpike  Co.  v. 

Ferree 

Mount  Sterling  Turnpike  Co.  r.  Looney 

Mountford  v.  Harper 

Movins  V.  Lee 

Moyser  v.  Whitaker 

Mudd  V.  Reeves 

Muench  v.  Valley  National  Bank  .  . 
Mulcahey  v.  Emigrant  Indus.  Savings 

Bank 

JMullick  V.  Radakissen 

Mullins  I'.  Brown 

Mumtbrd  ;;.  Hawkins 

M>mger  v.  Albany  County  Bank  .     .     . 

^lunn  V.  Burch 

Munson  et.  al.  v.  Syracuse,  &c.  R.  R.  Co. 

Murray  v.  Cannon 

V.  Earl  of  Stair 

?•.  Judah 

r.  Lardner 

■ V.  Nelson  Lumber  Co 

i:  Pinkett 

jMussey  r.  Eagles'  Bnnk 

Mutual  Bank  v.  Rotge 

Savings  Inst.  v.  Enslin  .... 


21  Ga.  513 
37  Iowa,  457 


292,  309,  326 

255 

754 

260,  4  Scott,  094  .  238, 
243,  421 
,  .  128 
227,  255 


17N.  J.  Eq.  118 

1  Met.  Ky.  550  . 

10  M.  &  W.  825 
30  Fed.  R.  298  . 
9  Barn.  &  Cr.  409 

2  II.  &  J.  368  . 

11  Mo.  App.  144 


89  N.  Y.  435 
28  Eng.  L.  &  Eq.  94 
32  Kans.  312 
5  Den.  355  , 
85  N.  Y.  587 
25  III.  35  . 
103  N.  Y.  58 
41  Md.  406  . 
2  Barn.  &  Cr.  82 
G  Cow.  484  .  39: 
2  Wall.  110  . 
143  Mass.  251 
12  CI.  &  F.  704 
8-  Met.  300  . 
28  La.  An.  933 
40  Mo.  200  . 


9,98 


15 


21 


713 
144 
552 
130 
380 
059 
559 


.  604 

421,  n.  9 

,  .  544 

143,  159 

298,  302 

93,  450,  494 

.  125 

308,  010,  615 

.  .  390 

9,  425,  446 

.  .  605 

101,  762 

.  .  326 

17,  155,  413 

,  .  415 

.  454 


N. 


Nance  c.  Hempliill 1  Ala.  551 13 

Naser  v.  First  Nat.  Bank 30  Hun,  343 346 

Nash  r.  Manufacturers  &  Traders' Bank  5  Hun,  568 II.  130  d 

Nassau  Bank  v.  Broadway  Bank ...  54  Barb.  236 411 

r.  Jones 95N.  Y.  115 730 

National  Albany  Exch.  Bank  v.  Wells  .  18  Blatchf.  478      ....      II.  141  v 


TABLE   OF   CASES.  1x1 

[All  references  are  to  Sections.] 

National  Bank  y.  Board  of  Equalization  64  Iowa,  140      ....  II.  141,  n.  98 

V.  Burkhart 100  U.  S.  68G 569 

r.  Case 99  U.  S.  628.     .     .     .     II.  108a,  112  i 

V.  City  Bank 103  U.  S.  G68 224 

U.Colby 21  Wall.  609      .     .      II.  150  a,  c,  157  a 

V.  Commonwealth 9  Wall.  353 II.  141  b,  q 

f.  Drake 35  Kans.  564 124 

V.  Eliot  Bank 20  Law  Rep.  138    .   289,  493,  494,  499, 

511,  520,  568 

V.  EUicott 31  Kans.  173 247 

V.  Graham 79  Penn.  106, 

100  U.  S.  699      ...    48,  102,  727 

V.  Indiana  Banking  Co.     .     .     .     114  111.  483 346,  542 

V.  Insurance  Co 104  U.  S.  54 325,  326,  567 

V.  Matthews 98  U.  S.  625  ....    48,  752,  IL  144 

V.  National  Bank 7  W.  Va.  544 413 

V.  Norton 1  Hill,  572 134 

V.  Perry 33  N.  W.  341  (Iowa) .     .     .     .   IL  129 

V.  Second  National  Bank  of  Lou- 
isiana   60Ind.  479    .     .     .    366,410,493,517 

V.  Smith 66  N.  Y.  271 562 

V.  Speight 47  N.  Y.  668 567 

V.  Washington  County  National 


Bank 5  Hun,  605 300,  302,  303 

V.  West.  National  Bank     ...     51  Md.  128 419,  464 

W^hitney 103  U.  S.  99 72,  752,  754 


National  Bank  of  America  v.  Indiana 

Banking  Co 114  111.  483    ..     .    375,  494,  530,  542 

National  Bank  of  Auburn  v.  Lewis  .     .     75  N.  Y.  516 II.  130  c 

National  Bank  of  Camden  v.  Pierce  .     .  18  Alb.  Law  Jour.  16      .   46,  II.  108  q, 

141  r 

National  Bank  of  Chattanooga  t'.  Mayor    8  Heisk.  814 II.  141  a 

National  Bank  of  Chemung  v.  Elmira  .     53  N.  Y.  49 II.  141  a 

National  Bank  of  Commerce  v.  Mer- 
chants'National  Bank     91U.  S.  (10tto,)92      .218,225,226, 

V.  National  Mechanics'  Banking  227,  593 

Association 55  N.  Y.  211      .     .     .    ,   479, 480, 481 

National  Bank   of   Commonwealth    v. 

Grocers'  National  Bank 35  How.  Pr.  412 463 

r.  Meclianics' National  Bank      .     94  U.  S.  437 IL  150e 

National  Bank  of  Fairhaven  v.  Phoenix 

Warehousing  Co 6  Hun;  71      .     .      IL  106  a,  108^7,  157 

National  Bank  of  Fayette  Co.  v.  Du- 

shane 96  Pa.  St.  340 IL  130  t 

National  Bank  of  Madison  v.  Davis  .     .  6  Cent.  Law  Jour.  106   .     .     II.  130  d 

National  Bank  of  Metropolis  v.  Orcutt  .     48  Barb.  256 II.  106  a 

National  Bank  of  Micliigan  v.  Green  .  33  Iowa,  140  .  .  .  12,  n.  13,  49 
National  Bank  of  New  Haven  v.  Phoenix 

Bank 6  How.  71 46 

National    Bank  of  North   America   v. 

Bangs 106  Mass.  441    .  463, 466,  477,  488,  489 

National  Bank  of  Republics.  Millard  .  10  Wall.  152     .    .    289,474,403,511, 

513,  568 


Ixii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

National  Bank  of  Kocliester  v.  Pearson  Thomp.  Nat.  Bank  Cas.  G37  .     .      73 
National  Bank  of  Ilockville  v.  Second 

National  Bank  of  Lafayette .     .     .     .     G9  Intl.  479 410,  517 

National  Bank  of  Winterset  r.  Eyre      .  2  N.  W.  Kep.  995  .     .     .     .      II.  130  m 

National  Citizens'  Bank  v.  Howard  .     .     3  How.  Pr.  n.  s.  572 575 

National  Commercial  Bank  v.  IMillcr     .  77  Ala.  1G8    .  340,  39G,  399,  414,  n.  12, 

National  Commercial  Bank  of  Mobile  v.  493,  515,  577,  584 

Mobile 02  Ala.  284 II.  141,  n.  55 

National  Exchange  Bank  u.  Boylen      .     20  W.  Va.  554 11.130/ 

v.  McLoon 73  Me.  498 495 

r.  Moore 2  Bond,  170  ...     .     49,  IL  130  d,  t 

r.    National    Bank    of    North 

America 132  Mass.  143 352,353 

National  Gold  Bank  ;'.  McDonald     .     .     51  Cal.  64 237,  509,  572 

National  Mabaiwe  Bank  V.  Peck.     .     .     127  Mass.  298 562,563 

National  Mechanics'  Banking  Associa- 
tion V.  Conklin 24  Hun,  496 ,     .       30 

National  Pahquioque  Bank  v.  Bethel 

Bank 36  Conn.  325      .     .     .     .171,11.  150  a 

National  Park  Bank  r.  German  INIut. 

W.  &  Security  Co 53  N.  Y.  S.  Ct.  307 136 

r.  Ginist 1  Abb.  N.  Cas.  292     ....    II.  157 

,..  Ninth  National  Bank     ...     46  N.  Y.  77 463 

!•.  Seaboard  Bank 44  Hun,  49 479 


National  Security  Bank  v.  Cushman     .  121  Mas.^^.  490    ...     .   109,  134,  136 

V.  Price 22  Fed.  Kep.  097 623 

National  Shoe  &  Leatlier  Bank  v.  Me- 
chanics' National  Bank 89  N.  Y.  407 II.  157  a 

National  State  Bank  v.  Boylan     ...  2  Abb.  N.  Cas.  21G     .     .     .     II.  130  a 

r.  IJingel 51  Ind.  393 299 

r.  Young 25  Iowa,  311 IL  141  m 

Nave  V.  Hadley^ 74  Ind.  155 170 

V.  First  National  Bank      ....  88  Ind.  204 170 

Neal  V.  Moultrie 12  Ga.  104 128,  n.  14 

Necly  v.  Kood 54  Midi.  134      .     .     186,  289,  326,  568 

Neiffer  !.'.  Bank  of  Knoxville    ....  1  Head,  162 98,  n.  14,  144 

Nelligan  v.  Citizens'  Bank  of  Louisiana  21  La.  An.  332 192,  312 

Nelson  v.  First  National  Bank  ....  48  III.  30 407,  511 

V. 107  Mass.  48 407 

Ncsmith  V.  Washington  Bank  ....  6  Pick.  329 9,  n.  11,  502 

New  England  Fire  &  ]Marine  Ins.  Co.  v. 

Schettler 88  III.  166 89 

New  England  Mar.  Ins.  Co.  v.  Chandler  16  Mass.  275 190 

New     Hampshire     Savings     Bank     i: 

Downing ^ 10  N.  II.  187      .     .     .     .     89,  98,  n.  22 

New  Hope  &  Delaware  Bridge  Co.  ?•. 

Perry 11  HI.  407 652 

r.  Phfrnix  Bank 3  Comst.  166 162 

New  Jersey  Steamboat  Co.  r.  Brockett  121  U.  S.  037 102,  n.  15 

New  Orleans  Canal  &  Banking  Co.  t'. 

City  of  New  Orleans 9  Otto,  97 II.  141  » 

New  Orleans   National  Bank   v.  Ray- 
mond        29  La.  An.  736 II.  128 


TABLE   OF   CASES.  Ixiii 

[All  references  are  to  Sections.] 

New  York  Bank  v.  Gibson 5  Duer,  574 493,  502 

New  York  Bowery  Ins.  Co.  r.  New  York 

Ins.  Co 17  Wend.  359 21 

New  York  Cable  Co.  v.  Mayor,  &c.  of 

New  York 104  N.  Y.  43      ...  45,  726,  758,  764 

New  York  Dry  Dock  y.  Hicks  .     .     .     .     5  McLean,  111 46 

New  York  Firemen's  Ins.  Co.  v.  Ely      .     2  Cow.  707 9,  n.  9,  50 

New  York  Iron  Mine  v.  Citizens'  Bank     44  Mich.  344 389 

New  York  M.  Iron  Works  v.  Smith  .     .     4  Duer,  362 565 

New  York,  &c.  11.  R.  Co.  v.  Haws     .     .     56  N.  Y.  175 654 

New  York  Trust  &  Loan  Co.  v.  Helmer     12  Hun,  35 14 

Newark  Savings  Inst.  Case      .     .     .     .  28  N.  J.  Eq.  552     ...     .      560,  617 

Newberry  Petroleum  Co.  v.  Weare  .     .     27  Ohio  St.  343 46 

NewboUl  V.  Wright 4  Rawle,  195 9,  n.  9 

Newell  y.  National  Bank  of  Somerset  .     12  Bush,  57 IL  130f/ 

Newlin  v.  McAfee 72  Ala.  357 576 

Newport  National  Bank  r.  Tweed    .    .  4  Houston,  (Del)  99,  225   .      II.  130  c 

Newton  v.  Snyder 44  Ark.  42 612 

Niagara  Bank  v.  Roosevelt 9  Cow.  409 637 

Niagara  Co.  Bank  v.  Baker 15  Ohio  St.  68  .     .     .     .  9,  n.  9,  50,  73 

Nicholas  v.  Adams 2  Whart.  (Pa.J  17 611 

NichoUs  V.  Pearson 7  Pet.  109 49 

Nicholson  v.  Crook 56  Md.  55 346 

V.  Ricketts 29  L.  J.  Q.  B.  55 439 

Nickerson  v.  Kimball 1  Chic.  Law  Jour.  42      .     .      II.  141  e 

Nolan  V.  Bank 67  Barb.  24 414,  n.  10 

Nonotuck  Silk  Co.  ?;.  Fair 112  Mass.  354 9,  n.  3 

Norman  v.  Ricketts Lond.  Bank.  Mag.  June,  1886,  497     395 

Norris  v.  Here 22  La.  An.  605 604 

V.  Staps Hob.  211 43 

North  River  Bank  I'.  Aymar  ....  3  Hill,  (N.  Y.)  262  .  .112,134,136 
North  Ward  National  Bank  of  Newark 

V.  Peterborough 10  Vroom,  380 IL  141 

Nortliampton  Bank  v,  Pepoon  .     .     .     .     11  Mass.  288 158 

Northern  Bank  i-.  Farmers'  Bank     .     .     18  B.  Monr.  506 650 

V.  Johnson 5  Coldw.  88 744 

Northern  Central  Railway  Co.  v.  Bas- 

tlan 15  Md.  494 98,  n.  26 

Northrop  v.  Hope 73  Me.  66 615 

I'.  Newton 3  Conn.  544 712 

V.  Sanborn 22  Vt.  433 366 

Northwestern  Bank  v.  Machir      ...     18  W.  Va.  271 14 

Northwestern  Railway  Co.  v.  Whinray      10  Exch.  77 31 

Norton  v.  Bank 61  N.  H.  592 65,  752 

V.  Seymour 3  C.  B.  792 439 

Norvill  V.  Hudgins 4  Munf.  496 565 

Note-holders  of  Bank  of  Tennessee  v. 

Funding  Board 16  Lea,  46 650 

Nutt  V.  Morse 142  Mass.  1 614 

Nutting  V.  Burkett 48  Mich.  241 423 


Ixiv  TABLE   OF    CASES. 

[All  references  are  to  Sections.] 

o. 

Oakland  Bank  of  Savings  r.  Wilcox     .     60  Cal.  127 147 

Oakley   v.    AVorkingmens'    Benevolent 

Societj' 2  Hilton,  487 143 

Oates  V.  First  National  Bank  of  Mont- 
gomery   lOOU.  S.  239     .     .     .49,503,11.130.7 

Ober  y.  Carson 62  Mo.  209 9,  n.3 

O'Brien  i-.  Smith 1  Black,  99 421 

Ocean  National  Bank  f.  Carll  .     .     .     .     7  Hun,  237 U.\^Oa,c,d 

Ocean  Tow-Boat  Co.  v.  Ship  Ophelia   .     11  La.  An.  28 54G 

O'Connor  v.  ]\iajoribanks 4  Man.  &  G.  435 325 

Odilie  V.  National  City  Bank    .     .     .     .     45  N.  Y.  735 451,  5G9,  571 

Oelricks  v.  Ford 23  Hun,  49 9,  n.  4 

Ogden  L-.  Benas Law  K.  Com.  V.  C  513  ....    475 

V.  Dobbin 2  Hall,  112 217 

v.  Marchand 26  La.  61 565 

r.  Eaymond 22  Conn.  384 128,  n.  22 

Ogdcnsburg  Bank  r.  Van  Rensselaer    .     6  Hill,  240 144,  n.  19 

O'Harec.  Second  Nat.  Bank  of  Titusville  77  Pa.  St.  96     ....      734,  IL  129 

Ohio  Railroad  Co.  v.  Wheeler  ....     1  Black,  286 46 

Olcott  V.  Rathbone 5  Wend.  490 169,  544 

Oldham  v.  First  National  Bank  of  Wil- 
mington       85  N.  C.  240 II.  130j 

Olmstead  v.  Winstead  Bank     ....     32  Conn.  278 652 

Olney  v.  Chadsey 7  R.  I.  224 144,  150 

O'Neill  V.  Bradford 1  Finn.  390 299 

Ontario  Bank  v.  Lightbody      ....     13  Wend.  101 637,  662 

V.  Schcrmerhorn 10  Paige,  107 298 

Ordway  y.  Central  National  Bank     .     .    47  Md.  217 IL130o,  143 

Orn  V.  Merchants'  National  Bank      .     .     16  Kans.  341 II.  128 

Orr  V.  Lacey 2  Dougl.  252 750 

V.  McGregor 43  Hun,  529 615 

V.  Union  Bank  of  Scotland  ...     1  Macq.  II.  L.  513 480 

Osborne  v.  Byrne 43  Conn.  155     ..     .    3,  560,  617,  632 

Osgood  V.  Lewis 2  Har.  &  G.  495 103 

Otes  V.  Gross 96  111.  612 186,  508 

Other  V.  Iveson 3  Drew.  187 435,  553 

Oulton  V.  Savings  Inst 17  Wall.  109 2 

Overholt  v.  National  Bank  of  Mount 

Pleasant 82  Pa.  St.  490 II.  1-30 1> 

Overman  r.  Iloboken  City  Bank  ...  1  Vroom,  61, 2  Vroom,  503  .      351,  409 

Owen  V.  Bowen  .     .     .     .' 5  Car.  &  P.  93,  96 185 

?'.  Branch  Bank  of  Mobile    ...     3  Ala.  258 664 

Owenson  v.  Morse 7  T.  R.  64 637 

O.xford,  &c.  V.  Bunnell 6  Conn.  552 712 


Pace  V.  Howard  College  Trustees     .     .     15  Ga.  486 605 

Pack  U.Thomas 13  S.  &  M.  11 421,  n.  9 


TABLE   OF   CASES. 


Ixv 


[All  references  are  to  Sections.] 


Packard  v.  Lewiston   .     .     . 
Palmer  v.  Lawrence    .     .     . 

V.  Marshall  .     .     .     , 

I'.  Ridge  Mining  Co. 

V.  Yates 


Pancoast  v.  Iluffin 

I'angborn  v.  Westlake 

Parclier  v.  Saco  &  Biddeford  Savings 

Bank 

Pardee  v.  Fish 

Parish  v.  Wheeler  ....... 

Parke  v.  Roser 

Parker  v.  Gordon    ....... 

V.  Hartley    ...... 

V.  Marchant      ...... 

V.  Marston 

V.  Stroud  

Parkersburg  Bank's  Appeal     .... 
Parkersburg  National  Bank  v.  Als    .     . 

Parsons  v.  Treadwell 

Parton  v.  Hervey 

Partridge  v.  Coates 

Paschall  v   Whit  sell 

Pascoag  Bank  v.  Hunt 

Patriotic  Bank  v.  Farmers'  Bank      ,     . 

Patterson  v.  Poindexter 

Patterson  Bank  v.  Butler 

Pattison  v.  Syracuse  National  Bank     . 

Patton  V.  Beecher 

V.  State  Bank 


55  Me.  456  . 
3  Sandf.  161 . 
60  111.  28!)  . 
34  Pa.  St.  288 
3  Sandf.  L37  . 
1  Ohio  St.  .'JSl 
3G  Iowa,  526 


Patton's  Adm'r  v.  Ash 
Paul  ?;.  Virginia  .  . 
Paxton  V.  Courtney  . 
V.  Sweet  .     .     . 


Payne  v.  BuUard     .... 

V.  Clark 

V.  Commercial  Bank 

V.  Gardner  .... 


Peachey  v.  Rowland    ,     .     .     . 

Peacock  p.  Purcell 

Peak  V.  Ellicott 

Pearce  v.  Davis       

Pearson  v.  Bank  of  Metropolis 

Pease  v.  Landauer 

V.  Warren 


Peck  V,  Mayo 

Pedder  v.  Preston 

Peel  V.  Tatlock 

Pelham  i-  Adams 

Pelton  V  Commercial  National  Bank  of 

Cleveland   .  

Pemigewassett  Bank  v.  Rogers    .     .     . 
Pendergast  v.  Bank  of  Stockton  .     .     . 

VOL.  I.  € 


7  Atl.  R.  266  (Me.) 
60  N.  Y.  265   .  . 

22  N.  Y.  494  .  . 
67  Ind.  603  ..  . 
7  East,  385  .  .  . 
91  Pa.  St.  465  .  . 
Y.  &  Coll.  C.  C.  290 
27  Me.  196  ..  . 
98  N.  Y.  379  .  . 
6  Wk.  No.  Cas.  394 

5  W.  Va.  50  ,  .  . 
50  N.  H.  356   .  . 

1  Gray,  119  .  .  . 
Ry.  &  Mood.  158  . 
11  Ala.  472  ..  . 
3  Edw.  Ch.  583  . 

2  Cranch  C.  C.  560 

6  Watts  &  Serg.  227 

7  N.  J.  Eq.  268  .  . 
80  N.  Y.  94  .  .  . 

62  Ala.  579  .  .  . 
2  N.  &  M.  464  .  . 

7  Serg.  &  R.  116  . 

8  Wall.  168  ..  . 

2  Post.  &  Fin,  131 

1  Green,  (N.  J.)  196 

23  Miss.  88  .  .  . 
23  Mo.  259  ..  . 
6  Sm.  &  Mar.  24  . 
29  N.  Y.  146   .  , 

16  E.  L.  &  Eq.  442 
14  C.  B.  N.  s.  728 

3  Kans.  156 

1  M.  &  Rob.  365 
1  Pet.  89  .  .  . 

63  Wise.  20  .  . 
20  Mich.  9  .  . 
14  Vt.  33  .  .  . 

9  Jur.  N.  S.496,  11 
1  Bos.  &  P.  419 

17  Barb.  384   . 


.  .n.  14W 
668,  669,  673 
.  565 
71 
9,  115 
.  641 
.  734 


9, 


51 


,  298, 


.  614 

299,  302 
.  750 
.  482 
.   45 

207,  567 
.  606 

611,  612 
.  322 


101  U.  S.  143  . 
18  N.  H.  2.56  . 
6  Am.  Law  Rec.  574 


C. 


N 


630 

309 

309 

754 

460 

761 

173 

9,  n.  19,  220 

51,  299 

.  265 

47,  195 

.  576 

.  650 

.  552 

.   46 

9,  n.  8 

.   43 

71,  672,  687 

,  307 

,  165 

,  289 

102 

,  565 

,  567 

552 

220,  222,  231 

494,  537 

.  564 

12,  n.  15 

s.  535  327 

42 

51 


XL  141  M 

103,  125 

.  II.  112 


Ixvi  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Pendleton  i-.  Bank  of  Kentucky  .     .     .  1  T.  B.  Monr.  171     19,  25,  27,  42,  102, 

lu(),  IGH,  254 

Penfield  v.  Tluiyor 2  E.  D.  Smith,  305 G08 

Penfohi  V.  Mould L.  K.  4  Eq.  502 010 

Peninsular  Bank  v.  Ilanmer    ....     14  Mich.  208 153 

Penn  Bank  ".  Prankish 91  Pa.  339 438 

Pennell  v.  Detfell 4  DcG.  M.  &  G.  372   .     .  343,  355,  590 

Penobscot  &  Kennebec  K.  II.  Co.  v. 

Dunn 36  Me.  501 G71 

Pentz  V.  Sackett Hill  &  I).  113 144 

People  V.  Assessors  of  Albany      ...  5  Tlionip.  &  C.  155    ...      II.  141  h 

V.  Bank  of  Dansville     ....     39  Hun,  187 567 

V.  Bank  of  Niagara C  Cow.  196 7G0,  701 

V.  Bartow 6  Cow.  290 13 

i;.  Brewster 4  Wend.  498 13 

V.  City  Bank 93  N.  Y.  583 248,  630 

V. 90  N.  Y.  32 507 

V. 7  Col.  22G 761 

r.  Commissioners 4  Wall.  244 II.  141  c,  ?/ 

r. 8  Hun,  536 II.  141  r 

V. 4  L.  &  E.  Rep.  213     ..     .      II.  141  t 


V.  Commissioners  of  Taxes    .     .     2  Black,  620 II.  141 1 

V. 94U.  S.  415 11.141c 

V. 69N.  Y.  91 11.1416 

V.  Dolan 36  N.  Y.  59 II.  14U: 

V.  Hudson  Bank 6  Cow.  217 761 

V.  Jansen .7  Johns.  332 37 

r.  Jenkins 17  Cal.  500 42c 

r.  Johnson 14  111.  342 346 

r.  :\Ianhattan  Co 9  Wend.  351 6,  764 

V.  Mechanics    &  Traders'   Sav- 

Inst 28  Hun,  375 632 

•  V.  Merchants  &  Mechanics'  Bank  78  N.  Y.  269  .     .     .    248,  493,  524,  668 

•  V.  Oakland  County  Bank  ...  1  Dougl.  282      ...   46,  03,  761,  764 

•  V.  Security  Life  Ins.  Co.   .     .     .     78  N.  Y.  122 632 

.  V.  Shaw 5  Johns.  236 298 

■  V.  State  Bank 36  Hun,  607 609 

■  V.  State  Treasurer 4  Mich.  27 646 

24  111.433 647 

V.  Thompson 21  Wend.  235 760 

V.  Throop 12  Wend.  183 124 

V.  Utica  Ins.  Co 15  Johns.  358 13 

r.  Vilas 36N.  Y.  459 31 

f.  Wasiiington  &  Warren  Bank      6  Cow.  211 645.700,761 

People's  Bank  v.  Gridley 91  111.  457 710 

1-.  Kurtz       99  Pa.  St.  344 103 

V.  Legrand 103  Pa.  St.  307 562 

V.  National  Bank 101  U.  S.  181 65,  101 

People's  Savings  Bank  v.  Cuppo  ...    91  Pa.  St.  315 620 

Peoria  &  Pekin  Union  K.  Co.  v.  Buckly     114  III.  337 546 

Peppin  V.  Cooper 2  B.  &  Aid.  431 27 

Percy  v.  Millaudon 3  La.  568 117,  127 

Perkins  v.  Challis 1  N.  H.  254 566 


TABLE  OP  CASES.  Ixvii 

[All  references  are  to  Sections.] 

Perkins  v.  Franklin  Bank 21  Pick.  48-3 636 

Perley  v.  Muskegon  Co 32  Mich.  132 289 

Peterson  v.  The  Mayor 17  N.  Y.  449 159 

V.  Union  National  Bank    ...  52  Pa.  St.  206   ...     .  350,  569,  572 

Petillon  I'.  Noble 9  Leg.  News,  314  (Biss.)     .      IL  157  c 

Petrie  v.  Myers 54  How.  Pr.  513 324 

Pew  I'.  First  Nat.  Bank  of  Gloucester  .     130  Mass.  391 150 

Peyton  v   Hallett 1  Caines,  363 494,  538 

Plielan  v.  Iron  Mountain  Bank     ...     Ill  U.  S.  125 568 

r.  Moss G7  Pa.  St.  62 565 

Philmlelphia  Bank  v.  Ex'rs  of  Thomas 

Otlicer 12  Serg.  &  R.  49 295 

Piiiladelphia  Loan  Co.  r.  Towner      .     .     13  Conn.  2-59 7-3,  748 

Pliihiiklphia  Railroad  Co.  r.  Derby  .     .     14  How.  468 102,  n.  6  &  12 

Philadelphia,  Wilmington,  &,  Baltimore 

R.  R.  V.  Quigley 122  U.  S.  607 102,  n.  15 

Phillips  V.  Ballard 58  Ga.  256 544,  546 

V.  Franciscus 52  Mo.  370 300 

Phillips  Academy  v.  King 12  Mass.  546 55 

Phipps  r.  Milbury  Bank 8  Met.  79       232 

V.  Tanner 5  Car.  &  P.  488 444 

Phoenix  Bank  v.  Bank  of  America   .     .  1  N.  T.  Leg.  26  (Ohio)  .     .    414,  n.  16 

V.  Risley Ill  U.  S.  125 248,  568 

Pickard  v  Bankes 12  East,  20 637 

V.  Sears 6  Ad.  &  El.  469 468 

Pickett  V.  Merchants'  National  Bank  of 

Memphis 52  Ark.  346 11.  130  c 

Pierce  v.  Boston  Five  Cents   Savings 

Bank 129  Mass.  425 610,  612 

r.  Butler. 14  Mass.  303 9,  n.  9,  221 

V.  Howe 1  N.  H.  182 309 

V.  Williams 23  L.  J.  Exch.  322 42 

Pierson  v.  Tiiompson 1  Edw.  Ch.  212 140 

Pindall  v.  N.  W.  Bank 7  Leigh,  617 659 

Pine  V.  Smith 11  Gray,  38 12,  n.  5 

Pine  River  Bank  v.  Hodsdon   ....    4G  N.  H.  114 669 

Finer  v.  Clary 17  B.  ]\Ion.  (Ky.)  645     ...    .     299 

Piscataqua  Bridge  v.  N.  H.  Bridge   .     .     7  N.  H.  69 6 

Piscataqua  Exch.  Bank  v.  Carter  .  .  20  N.  H.  216  ....  9,  n.  9  &  17 
Pittsburg  Locomotive  &  Car  Works  r. 

State  National  Bank 2  Cent.  Law  Jour.  692   .     .      II.  108/ 

Planters' Bank  r.  Bank  of  Alexandria  .     10  Gill  &  J.  346 763 

V.  Farmers  &  Mechanics'  Bank  .     8  Gill  &  J.  449 322 

V.  Kesee 7  Heisk.  200 367,  375 

V.  Lamkin R.  M.  Cliarlt.  29 26,  43 

V.  Merritt 7  Heisk.  177 .     .     .  421,  n.  12,  493,  527 

I'. 4  Sm.  &  Mar.  75 750 

V.  Sliarp 6  How.  301 6,  49 

V.  State 6  Sm.  &  Mar.  628 761 

V.  Union  Bank 16  Wall.  483 248 

Planters  &  Merchants'  Bank  v.  Hill      .     1  Stew.  201 17,  22 

Piatt  V.  Beebe 57  N.  Y.  339      ....     II.  101,  150 

V.  Grubb 48  Hun,  447 604 


Ixviii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Piatt  V.  Sauk  Co.  Bank 17  Wise.  222 299 

Piatt,  Kec,  r.  liLacli 2  Bcned.  303 IL150a 

c.  Bentlev 11  Am.  Law  Keg.  171     ....    o38 

Petition  of 1  Bened.  634     ...     .      II.  14G,  157 

Plaj-er  v.  Archer 2  Sid.  121 43 

Plets  r.  Johnson 3  Hill,  112 370 

Plymouth  Bunk  r.  Bank  of  Norfolk.     .     10  Pick.  454 9,  n.  11,  698 

Poirier  v.  Morris 20  Eng.  L.  &  Eq.  103     ...     .     565 

Polglass  r.  Oliver 2  C.  &  J.  15 447,037 

Pollard  f.  Bo  wen 67  Ind.  232 423 

V.  Ogden 2  E.  &  B.  459 672 

1-.  Rowland 2  Blackf.  22  (Ind.) 267 

V.    Stockholders   of    Kentucky 

Exporting  Co 4  J.  J.  Marsh.  52 G90 

Pomeroy  t\  Arrisworth 22  Barb.  118 12,  n.  13 

Pond  I'.  Underwood 2  Ld.  Raym.  1210 438 

Poorman  u.  Mills 35  Cal.  118    .     .     .     .51,298,299,442 

Pope  V.  Bank  of  Albion 59  Barb.  22G 155,  406,  413 

v.  Capitol  Bank  of  Topeka   ...    20  Kans.  440 72 

Porter  r.  Bank  of  Rutland 19  Vt.  410 Ill 

i;.  Talcott 1  Cow.  359 644 

V.  Taylor G  Man.  &  Seld.  156 439 

Portland  Bank  v.  Storer 7  Mass.  433 77 

Pott  V.  Clegg IG  M.  &  W.  321     .    289,  309,  322,  5G8 

Potter  V.  Merchants'  Bank 28  N.  Y.  Gil 158,  175 

V.  Tallman 35  Barb.  182 12,  n.  15 

Powell  I'.  Jones 72  Ala.  392 676 

V.  Morrison 35  Mo.  244 604 

V.  Regem 3  Bro.  P.  C  436 43 

Powles  V.  Paige 3  C.  B.  25 134 

Prather  v.  Kean 29  Fed.  Rep.  498 212 

Pratt  V.  Foote 9  N.  Y.  4CG 410,  451 

Prescott  V.  Leonard 32  Kans.  142 217 

President  v.  Corwin 37  N.  Y.  320 136 

Preston    v.    Canadian    Bank   of   Com- 
merce      23  Fed.  Rep.  179 352 

Price  V.  Abbott 17  Fed.  Rep.  506 IL  157 

v.  Neale 3  Burr.  1355      ....  462,463,488 

Price,  Rec.,  v.  Yates 19  Abb.  L.  J.  295  .     .     .     .     II.  150  a 

Prideaux  r.  Criddle L.  R.  4  Q.  B.  455  .     .     .     .      232,  427 

Proctor  V.  Whitcomb 139  Mass.  303 78 

Prosser  v.  Wagner 1  C.  B.  n.  s.  289 438 

Protection  Ins.  Co.  v.  ITarmer  ....     2  Ohio,  452 9,  n.  9 

Providence  Bank  v.  Billings     ....     4  Peters,  5G1 G 

Providence  Inst.  ;•.  Taft 14  R.  I.  502 608 

Provident  Inst,  for  Savings  v.  City  of 

Boston 101  Mass.  575 II.  141  i 

Pruyn  v.  Van  Allen 39  Barb.  354 706 

Purcell  V.  Allemong 22  Gratt.  739 423 

Purchase  v.  Mattison 6  Duer,  587  ...     .      398,  421,  n.  16 

Putnam  v.  Sullivan 4  Mass.  45 480,  486 

Pym  V.  Campbell 25  L.  J.  n.  s.  277 390 


TABLE   OP   CASES.  Ixix 
[All  references  are  to  Sections.] 

Q- 

Quiucy  Canal  v.  Newcomb 7  Met.  277 764 

R. 

Raborg  v.  Bank  of  Columbia   ....     1  liar.  &  G.  2.31 220 

Eailroad  Co.  ;;.  Howard 7  Wall.  392 032 

r.  National  Bank 102  U.  S.  14 (500 

Kamsdale  v.  Horton 3  Pa.  330 659 

Rainsden  v.  Boston  &  Albany  11.  R.  Co.     104  Mass.  117 102 

Ranger  v.  Great  Western  R.  Co. ,     .     .     5  H.  L.  Cas.  72 102,  n.  10 

Rankin  v.  Sherwood 33  Me.  509 G88 

Ransom  v.  Mack 2  Hill,  592 2-55 

Rapliael  v.  Bank  of  England    .     .     .     .     17  C.  B.  ICl 649 

Rastell  V.  Draper Yelv.  80,  Moore,  775,  Cro.  Jac.  88    366 

Ratlibun  y.  Citizens' Steamboat  Co.      .    70  N.  Y.  376 247 

Ray  V.  Bank 10  Bush,  344 201 

V.  Simmons 11  R.  I.  266 610 

Raymond  v.  Baar 13  Serg.  &  R.  318 659 

f.  Sellick 10  Conn.  484 611 

Raynor  v.  Pacific  Nat.  Bank  of  Boston      93  N.  Y.  371 II.  152 

Reapers'  Bank  v.  Willard 24  111.  433 646 

Receiver  of  N.  Amst.  Savings  Bank  v. 

Tartler 4  Abb.  N.  C.  215 339 

Receivers  v.  Patterson  Gas  Light  Co.   .    23  N.  J.  Law,  283 338 

Receivers  of  Bank  of  Circleville  v.  Ren- 
nick  15  Ohio,  322 763 

Reddeil  v.  Dobsee 3  Jur.  722 550 

Redington  v.  Woods 45  Cal.  406 454,  489 

Reese  y.  Bank  of  Commerce     ....     14  Md.  271 699,701,702 

Reeve  y.  Smith 113  111.47 346 

Reeves  v.  State  Bank 8  Ohio  St.  465   .  250,  265,  272,  279,  631 

Regina  v.  Esdaile 1  F.  &  F.  213 132 

i;.  Watts 2  Den.  (Crown  C.)  14     ....     460 

Renner  v.  Bank  of  Columbia    ....  9  Wheat.  581      9  C,  9  F,  220,  229,  231 

Revere  y.  City  of  Boston 5  Rep.  46  (Mass.)  .     .     .     .     II.  141  n 

Rex  V.  Bird 13  East,  384 43 

V.  Gmever 6  T.  R.  735 43 

V.  Nutt Fitzg.  47 102 

V.  Weymouth 7  Mod.  374 43 

Reynolds  v.  Cliettle 2  Camp.  596 354 

V.  First  National  Bank  of  Craw- 

fordsville 112  U.  S.  405 II.  128 

Reynolds,  Assignee,  v.  Simpson  &  Led- 

beth 74  Ga.  454 78 

Rhodes  y.  Childs 64  Pa.  St.  18 611,612 

y.  Morse 14  Jur.  800 395  A 

V.  Webb 24  Minn.  292     ....  99,  144,  n.  12 

Rich  V.  Errol 51  N.  H.  350 752 

V  State  National  Bank  of  Lincoln     7  Neb.  201 101 


IXX  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Kicliards  v.  Kountze 4  Neb.  200 IT.  128 

r.  New  lijuiipshire  Ins.  Co.   .     .    43  N.  H.  2G3 125 


Kicliardson  v.  luteruatioual  Bank     .     .     11  Brad.  582 320,  445 

r.  Kice Cent.  Law  Jour  ,  Vol.  VII.,  No.  12    565 

f.  Richardson L.  11.  3  Eq.  08G 610 

Kickford  v.  Ridge 2  Camp.  537  .     .     9,  n.  9,  238,  240,  243 

Ridgely  National  Bank  v.  Patton      .     .     109  111.  479 557 

Kidgway  v.  Farmers'  Bank 12  Serg.  &  R.  250  .     70,  98,  n.  33,  116, 

144,  n.  22,  IGO,  295 
Ridley  i\  Plymouth  Grinding  &  Baking 

Co 2  Exch.  711 127 

Riley  v.  Albany  Savings  Bank     .     .     .     30  Ilun,  513 319 

('.  City  of  Rochester 5  Seld.  02 55 

RindskofFi-.  Barrett 11  Iowa,  172 9,  n.  9 

Ringling  v.  Kohn 4  Mo.  App.  59 505 

Ringo  V.  Trustees  of  Real  Estate  Bank    8  Eng.  503 045 

Ripka  V.  Geddis 20  Pa.  St.  140 12,  n.  13 

Risley  I'.  Plianix  Bank 83  N.  Y.  318      .     .     407,493,511,524 

Ritchie  i-.  Bradsliaw 5  Cal.  228 421 

Rivanna  Navigation  Co.  v.  Dawson       .     3  Gratt.  19 55 

Robarts  1-.  Tucker 10  Q  B.  5G0 474,480 

Robb  V.  Ross  County  Bank       ....     41  Barb.  586 156,  158 

Roberts  v.  Corbin 26  Iowa,  315       307,  375,  493,  494,  496, 

528,  531 

V.  Hall 37  Conn.  205 505,  600 

r.  Kill 23  Blatchf.  191 623 

r.  Lane 04  Me.  108 750 

(.Roberts, 15  W.  R.  177 608 

Robertson  v.  Allen 59  Tenn.  233 565 

V.  Burdekin 1  Ross.  L.  C.  812   .     .     .     .      12,  n.  13 

Robinson  v.  Ames 20  Johns.  140 227 

V.  Bank  of  Attica 21  N.  Y.  406 452 

t;.  Bank  of  Darien 26  Ga.  17     649,652,055,687,601,761 

V.  Bealle 20  Ga.  275 126,  639,  687 

V.  Bland 2  Burr.  1077 743 

V.  Commonwealth 3  Sum.  220 10 

V.  Frost 14  Barb.  536 325 

V.  Ilawksford 9  Q.  B.  52     .     378,  380,  421,  n.  10,  495 

V.  Lane 19  Ga.  339    .     .     .     056,  679,  692,  694 

!'.  National  Bank  of  New  Berne     19  Ilun,  477 II.  157  o 

v.  Ring 72  Me.  140 615 

V.  Smith 14  Cal.  94 600 

v.  Ward 2  Cow.  &  P.  59 604 

Robson  V.  Bennett 2  Taunt.  388 408,  418 

V.  Oliver       10  Q.  B.  704 425 

Rochester  City  Bank  v.  Elwood   .     .     .    21  N.  Y.  88 23,  30 

Rochester  Printing  Co.  v.  Loomis      .     .     45  Ilun,  93 629 

Rock  V.  Nicliols 3  Allen,  342 710 

Rock  County  National  Bank  v.  HoUister    21  Minn.  385 246 

Rock  River  Bank  v.  Sherwood      ...     10  Wise.  230 750 

Rodick  V.  Gandell 1  DeG.  M.  &  G.  763   .     .  495,  511,  541 

Roebling  r.  First  National  Bank  ...     30  Fed.  licp.  744 78 

Roger  V.  Keystone  National  Bank     .     .     83  Pa.  St.  248 665 


TABLE   OP   CASES.  Ixxi 

[All  references  are  to  Sections.] 

Rogers  v.  Huntingdon  Bank    ....  12  Serg.  &  R.  77    .     .    .    .      701,  702 

f.  Kelly 2  Camp.  123 24 

V.  New  Jersey  Ins.  Co.      ...    4  Ilalst.  Ch.  II.  1G7 713 

RoUin  V.  Steward 14  C.  B.  594 458,  459,  507 

Rolls  V.  Pearce 5  Cli.  D.  730 •  549,  550 

Rollstoii  National  Bank  v.  Carleton  .     .     130  Mass.  220 30 

Root  V.  Erdlemeyer 37  Ind.  225 II.  141  a 

Rosa  I'.  Brotherson 10  Wend.  80 599 

Roscorla  v.  Thomas 3  Q.  B.  234 103 

Rose  V.  Hart 8  Taunt.  499 330 

Rosenback  ??.  Salt  Springs  Nat.  Bank   .  53  Barb.  495      ....     698,11.112 

Rosenblatt  v.  Haberman 8  Mo.  App.  486 424 

V.  Johnston 104  U.  S.  462 II.  141  u 

Rosenthal  v.  Mastin  Bank 17  Blatchf.  318  ....  493,  513,  522 

Ross  V.  Bedell 5  Duer,  462 393,  505 

V.  Curtis 30  Barb.  238 499,  506 

Rothscliild  V.  Corney 9  Barn.  &  Cr.  389 .    402,  441,  442,  443 

Rounds  V.  Smith 42  111.  245     ..     .    414,  451,  494,  530 

Rouvant  v.  San  Antonio  National  Bank    63  Sex.  610 466 

Row  i\  Dawson 1  Ves.  Sen.  331 407 

Royal  Bank  v.  Turquand 6  Ellis  &  Black,  327   ..     .      98,  n.  32 

Ruffin  V.  Board  of  Commissioners     .     .  69  N.  C.  498 .     .     .     .  186,  568,  II.  141 

RufEord  V.  Bishop 5  Russ.  346 809 

Runyan  v.  Lessee  of  Coster      ....     14  Pet.  122,  131 46,  754 

Russell  V.  Hanky 6  T.  R.  12 252 

V.  Langstaffe Douglas,  514 486 

Ryan  v.  Dunlap 17  111.  40 159 

V.  Manufacturers  &  Merchants' 

Bank 9  Daly,  308 246 


S. 

Saekett's  Harbor  Bank  v.  Lewis  Co. 

Bank 11  Barb.  213 59,  77 

Sadler  v.  Belcher 2  M.  &  Rob.  489    ..     .  289,  589,  629 

Safford  v.  Wyckoff 4  Hill,  442    .     .      03,  70,  743,  744,  745 

Sagory  v.  Dubois 3  Sandf.  Ch.  466     ...     .     669,  670 

St.  Louis  V.  Johnson 5  Dill.  241       .     188,  567,  573,  575,  589 

St.  Louis  National  Bank  v.  Allen      .     .     2  McCrary,  92 II.  157 

V.  Brinkman 1  Fed.  Rep.  25       .....     II.  157 

V.  Papin 3  Cent.  Law  Jour.  069  .     .      II.  141  c 

St.  Louis  Perpetual  Ins.  Co.  ?'.  Colien   .     9  Mo.  416 158 

St.   Louis   School  Board  v.  Broadway 

Savings  Bank  Estate 84  Mo.  56 42 

St.  Saviour's  Southwick  v.  Bostock       .     2  New  R.  174 27 

Salem  Bank  v.  Gloucester  Bank  ...  17  Mass.  1         89,  98,  n.  17,  102,  n.  22, 

127,  167,  171,468,058,659 

Salt  Lake  City  I'.  Hollister       .     .     .     .     118X1.8.256 102,  n.  15 

Salt  Springs  National  Bank  i\  Burton  .     58  N.  Y.  430 45,  229 

Sake  V.  Field 5  T.  R.  215 100 

Salter  v.  Burt 20  Wend.  205 380,  389 


Ixxii  TABLE   OP   CASES. 

[All  references  are  to  Sections.] 

Samples  v.  Bank 1  Woods,  523 C43 

Saiuiford  r.  Hayes 5-2  Pa.  St.  2G       103,  312 

v.  INIcAitliur 18  B.  Mon.  411   ...     .       128,  n.  22 

Sandy  River  ISank  v.  Merchants'  Bank     1  Biss.  146  159 

Sargeant's  Case 1  Kose,  153 588 

Sargent  v.  Webster 13  Met.  (Mass.)  497     ...     .        120 

Saunders  v.  Ilatterman 2  Iredell,  32        359 

V,  White 20  Gratt.  397       637 

Saunderson  v.  Jackson 2  B.  &  P.  238 305 

V,  Piper 5  Bing.  New  R.  430     ....       444 

Savannah   Bank  &  Trust  Co.  v.  Ilart- 

ridge 73  Ga.  223 136 

Savings  Bank  r.  Bates 8  Conn.  505 641 

Savings  Bank  of  Cincinnati  I'.  Benton  .    2  Met.  (Ky.)  240 143 

Sawtelle  v.  Drew 122  Mass.  228 !),  n.  12 

Sawyer  v.  Iloag 17  Wall.  010       506,  032 

r.  Pawners'  Bank 6  Allen,  207 150 

V.  AViswell        'J  Allen,  42 565 

Sayer  v.  Wagstaff 5  Beav.  415 447 

Saylor  y.  Bushong 100  Pa.  23  .     .   398,410,493,511,517, 

520,  535 

Schaffer  v.  Maddox 0  Neb.  205 421,  n.  14 

Schepp  V.  Carpenter 51  N.  Y.  602 389 

Schley  ;;.  Di.xon 24  Ga.  273 128,129 

Schmidt  v.  First  Nat.  Bank  of  Selma    .     22  La.  An.  314 II.  150  c 

Schneider  v.  Irving  Bank    .     .     .     .  ^ .     1  Daly,  500 290 

Schoenwald    v.    Metropolitan    Savings 

Bank 57  N.  Y.  418 620 

Scholcy  I'.  Ramsbottom 2  Camp.  485 445 

School  District  i'.  First  National  Bank     102  Mass.  126 326,  590 

Schoolfried  c.  Moore 9  Ileisk.  171 410,  421 

Schrocder  v.  Harvey 75  111.  638 489 

Scofield  V.  State  Nat.  Bank  of  Lincoln    9  Neb.  310 II.  144 

Scott  V.  Berkshire  Co.  Savings  Bank    .     140  Mass.  157 609,  610 

i>.  Commonwealth 5  J.  J.  Marsh.  043 637 

r.  Franklin 15  East,  428 324 

i-.  Fritz 51  Pa.  St.  418 334 

V.  Meeker 20  Hun,  101     . 421 

V.  Nat.  Bank  of  Chester  Valley  72  Pa.  St.  471  .     .     .      102,  n.  20,  191, 

190,  202 
V.  Ocean  Bank  in  City  of  N.  Y.  23  N.  Y.  289    .     .     .     .     574,  583,  599 


Pequonnock   National  Bank 


TIQ 


of  Bridgeport 21  Blatchf.  203 71 

V,  Porcher 3  Meriv.  052 398 

Shirk 00  Ind.  160 .       557 


Scruggs  V.  Gass 8  Yerg.  175      ..     .          ...      602 

Scudder  v.  Union  National  Bank      .     .     91  U.  S.  400 406 

Seagor  v.  Sligerland 2  Cames,  219 9,  n.  9 

Second  National  Bank  v.  Brown  ,     ,  72  Pa.  St.  209       .....     II.  130 

i,,  iiiu      .     , 76  Ind.  223       ......  557,  563 

y.  Smoot      ........     2  McArthur,  371 II  130  s 

V.  West.  National  Bank    .     .     .  51  Md.  128  ......         ■     464 

r.  Williams 13  Mich.  255        .     .     .    493,521,550 


TABLE    OF    CASES.  Ixxiii 

[All  references  are  to  Sections.] 

Security  Bank  V.  National  Bank  .  .  .  07  N.  Y.  458  .  .  .  4U,  n.  I'J,  4S2 
Security  Bank  of  New  York  v.  IS'ational 

Bank  of  Commonwealth 4  Tliomp.  &  C.  518    .     .     .      11.150  a 

Seeley  v.  New  York  Exchange  Bank    .  Tiiom]).  Nat.  Bank  Cas.  804    11.  113  d 

Sclden  v.  Equitable  Trust  Co.       ...     \)i  U.  S.  419 4 

Seifridge  v.  Northampton  Bank    ...     8  Watts  &  S.  320 645 

Seligman    v.    Cliarlotteville    National 

Bank 3  Hughes,  647 65 

Seneca  Co.  Bank  v.  Lamb 20  Barb.  595 48,  746 

Senter  r.  Continental  Bank      ....     7  Mo.  App.  532 522 

Serle  v.  Norton       2  Moody  &  R.  401     .     .     .     421,  n.  10 

Serrell  v.  Uerbysliire  Railroad  Co.    .     .  19  L.  J.  C.  P.  377     .     .    3G5,  440,  442 

Sessions  v.  Moseley 4  Cush.  78 549,  611,  G12 

Seventh  National  Bank  v.  Cook  ...  73  Pa.  St.  483  .     .      410,  414,  474,  511 

Sewall  ;;.  Boston  Water  Power  Co.  .     .     4  Allen,  277 480 

v.  Lancaster  Bank 17  Serg.  &  R.  285      .     .     701,  702,  705 

Seward  County  Commissioners  v.  Cottle     14  Neb.  144 289 

Sewell  v.  Corp 1  Car.  &  P.  392 9,  n.  19 

Seybel  i-.  National  Currency  Bank   .     .     54  N.  Y.  288 565 

Shackamaxon  Bank  v.  Kinsler     ...  16  Week.  Not.  Cas.  509     .     .     .      334 

Shaffer  v.  McKee 19  Oliio  St.  526 474 

Sharpe  v.  Bellis 61  Pa.  St.  69 486 

Shaw  V.  Bauman 34  Oiiio  St.  25 604 

V.  Clark 49  Mich.  384 136 

V.  Dartnall 6  Barn.  &  Cr.  57 291 

V.  Picton 4  Barn.  &  Cr.  715 291 

i:  Spenser 100  Mass.  382 317 

Sheehan  v.  Davis 17  Ohio  St.  571     ...     .      98,  n.  36 

Shelburne  Falls  i^.  Townsley    ....     102  Mass.  177       233 

Sheldon  v.  Clews 13  Abb.  N.  C.  69 628 

Sherman  v.  Fitch 98  Mass.  50 101 

Shiels  V.  Blackburn 1  H.  Bl.  158 215,  289 

Shinkle    v.    First    National    Bank    of 

Ripley 22  Ohio  St.  516     .     .  75,  II.  108,  130  a 

Shipsey  v.  Bowery  National  Bank    .     .     59  N.  Y.  485 252 

Shirley  >:.  Whiteliead 1  Ired.  Eq.  1.30 550 

Shoemaker  v.  Mechanics'  Bank    ...     59  Pa.  St.  83 223 

I'.  National  Mechanics'  Bank     .  2  Abb.  U.  S.  416       .  750,  II.  108,  129, 

157  6 

Shortbridge's  Case 12  Ves.  Jr.  28 436 

Siiower  V.  Pilch 4  Exch.  477       608 

Shrieve  v.  Duckham 1  Litt.  194 393 

Shunk  V.  First  National  Bank  of  Gallon  22  Ohio  St.  508     ...     .     II.  130  a 

V.  Merchants'  National  Bank      .     19  Chic.  Leg.  N.  83 329 

V.  Miller 5  Barr,  250 19 

Slmte  )'.  Pacific  National  Bank    ...  136  Mass.  487     ...     .    51,  298,  302 

Silver  Lake  Bank  v.  Nortli       ....  4  Johns.  Ch.  370    .  40,  59,  74,  754,  763 

Simmons  v.  Aldrich 41  Wise.  240 IL  141  k 

V.  Cincinnati  Savings  Society    .     31  Ohio  St.  457 551 

Simms  v.  Clark 11  III.  137 659 

Simonton  r.  Lanier 71  N.  C.  498 48 

Simpson  r.  Moulden 3  Cold.  429  (Tenn.) 299 

V.  Pacific  Mutual  Life  Ins.  Co.  44  Cal.  139      .     .    414,  n.  13,  421,  426 


Ixxiv  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

Simpson  r.  Savings  Bank 56  N.  II.  406 5GG 

r.  Waldby        oO  N.  W.  Kep.  109 272 

Sims  c.  Bond G  Barn.  &  Ad.  392    .     .    289,  293,  343, 

439,  5G8 

1-.  United  States  Trust  Co.    .     .    9  X.  E.  G05  (N.  Y.) 457 

Simson  r.  Ingiiam       2  Barn.  &  Cr.  72 327 

Sinclair  v.  Pearson 7  N.  H.  227 102 

Skilding  v.  Warren 15  Johns.  270 565 

Skillnian  v.  Tiius 3  Vroom,  96 388,  441 

Skinner  v.  Merchants'  Bank    ....    4  Allen,  200 103 

Skowhegau  Bank  v.  Cutler 49  Me.  315 710 

Skyring  v.  Greenwood 4  Barn.  &  Cr.  281 290 

Slawson  v.  Loring 5  Allen,  343 365 

Slee  V.  Bloom 19  Johns.  456 43,  693 

Sleedy  i;.  Koach 124  Mass.  472 612 

Sloan  V.  Union  Banking  Co 67  Pa.  St.  479 565 

Sloman  v.  Bank  of  England     .     .     .     .  ,  14  Sim.  459 435 

Small  V.  Franklin  Mining  Co.      ...  99  Mass.  211  ...     .      393,  422,  546 

V.  Smith 1  Den.  583        ,     .      565 

Smart  v.  Sanders 5  C.  B.  895 100 

Smedes  r.  Bank  of  Utica 20  Johns.  372  .      9,  n.  9,  232,  265,  274 

Smiley  l-.  Fry 100  N.  Y.  262 297,  302 

Smilie  v.  Stevens 39  Vt.  315 302 

Smith  V.  Addison        5  Cranch,  623 31 

V.  Ayer 101  U.  S.  320 817 

r.  Biink  of  Scotland      ....     1  Dow.  Pari.  R.  294 21 

V.  Bank  of  the  State     ....     18  Ind.  327 98,  750 

V.  Butler 1  Jones  &  Lat.  692 606 

v.  Chester 1  D.  &  E.  655     .     .     .       463,  476,  488 

r.  Dorsey 38  Ind.  451 611 

V.  Essex  County  Bank      ...     22  Barb.  627 214 

V.  Exch.  Bank  of  Pittsburg    .     .  23  Ohio  St.  141     ..     .     72,  II.  130  a 

V.  First  National  Bank      ...     99  Mass.  605 128,  202 

V.  Hull  Glass  Co 11  C.  &  B.  897 98,  n.  28 

r.  Janes 20  Wend.  192 421 

V.  Law 21  N.  Y.  299 54 

r.  Lawson 18  W.  Va.  212  .  .  144,  n.  15,  105,  171 

;•.  Lee 2  Th.  &  C.  591 610 

('.  Livingston Ill  Mass.  342 505 

?'.  Mechanics'  Bank 6  La.  An.  610 474 

V.  Mercer 6  Taunt.  76  .     .     .     40.3,  465,  487,  488 

V.  Miller 52  N.  Y.  645,  43  N.  Y.  176       234,  240, 

247,  421 

r.  Mosby 9  Heisk.  501 338 

V.  Northampton  Bank  ....     4  Cush.  1 163 

V.  Prattville  Manufacturing  Co.     29  Ala.  n.  s.  503 128 

V.  Kathburn 88  N.  Y.  660 89 

V.  Smith 1  R.  I.  398 366,  444,  485 

r. 2  Johns.  235 12,  n.  15 

V.  Snow 3  Mad.  C.  C.  310 706 

V.  Speer 34  N.  J.  Eq.  336 614 

r.  Union  Bank  of  London      .     .     L.  R.  10  Q.  B.  291 245 

r.  Whiting 12  Mass.  0    .     .     .     .  9,  n.  19,  9  B,  221 


TABLE    OF    CASES.  IXXV 

[All  references  are  to  Sections.] 

Snead  i-.  Williams 9  L.  T.  n.  s.  Exch.  115  .    .      291,  327 

Snow  r.  Ilousatonic  R.  R.  Co.      .     .     .     8  Allen,  441  (Mass.) 102 

Solomons  r   Bank  of  England      ...     13  East,  135 649 

Soper  V.  Buffalo  &  Rochester  R.  R.  Co.     19  Barb.  310 103 

V.  Harvard  College 1  Pick.  177 43 

Southerland  v.  Southerland      ....     5  Bush,  591 608 

Southern  Bank  v.  Williams      ....     25  Ga.  534 72G,  750 

Southern  Development  Co.  v.  Houston    27  Fed.  Itep.  344 568 

Southern  Loan  Co.  v.  Morris    ....     8  Barr,  175 51,  298 

Southgate  c.  Atlantic  &  Pacific  R.  R.    .     61  Mo.  89 159 

Southwick  V.  Estes 7  Cush.  385 102,  n.  12 

V.  First  National  Bank  of  Mem- 
phis     7  Hun,  96 II.  157  a 

Souverbye  v.  Arden 1  Johns.  Ch.  240 CIO 

Spafford  v  First  National  Bank  of  Tama 

City 37  Iowa,  181      ....     II.  108,  128 

Spahr  V.  Farmers'  Bank 94  Pa.  St.  434 758 

Spain  V.  Hamilton's  Administrator  .     .     1  Wall.  604 493,  495,  514 

Spalding  v.  Bank  of  Susquehanna  Co.  .     9  Barr,  28 145 

Sparks  v.  Farmers'  Bank  of  Delaware  .     3  Del.  Ch.  274 27 

Spear  v.  Ladd 11  Mass.  94 158 

Spencer  v.  Ballou 18  N.  Y.  327 232 

V.  Wilson 4  Munf.  180 100 

Spraights  i-.  Hawley 39  N.  Y.  441 599 

Springfield  v.  Green 7  Baxter,  301 546 

Springfield  Bank  v.  Merrick    ....     14  Mass.  322 746 

Springfield  Mar.  &  Fire  Ins.  Co.  v.  Peck     102  111.  263 347 

Spurraway  i-.  Rogers 12  Mod.  517 449 

Spyker  v.  Spence 8  Ala.  333 144 

Stackhouse  y.  Countess  of  Jersey     .     .     30  L.  J  Ch.  421 326 

Stacy  i;.  Dane  County  Bank    ....  12  Wise.  629     .     .     236,206,274,287 

V.  State  Bank 4  Scam.  91 140 

Stafford  National  Bank  v.  Dover      .     .     58  N.  H.  316 II.  141  p 

Stagg  V.  Elliott 12  C.  B.  N.  s.  373  .     .     .     .      98,  n.  15 

Stair  V.  York  National  Bank    .     .     .     .     5  P.  F.  Smith,  364 343 

Stalker  v.  McDonald 6  Hill,  93 699 

Stamford  Bank  v,  Benedict .     .         .     .     15  Conn.  437 70,  165 

V.  Ferris  . 17  Conn.  259 170 

Stanhope's  Case .3  DeG.  &  Sra.  198 119 

Staniland  v  Willott 3  Mac.  &  G.  664 611 

Stanton  v.  Blossom 14  Mass.  116 90 

Staples  V.  Franklin  Bank 1  Met.  43 636 

Star  Fire   Ins.  Co.  v.  New  Hampshire 

National  Bank 60  N.  H.  442      ....   472,  477,  489 

Stark  V.  Gamble 43  N.  H.  468 309 

V.  U.  S.  National  Bank     ...    41  Hun,  506 ,     .     .     599 

Stark  Bank  I'.  U.  S.  Pottery  Co.      .     .    34  Vt.  144         127 

State  V.  Bank  of  Carolina 1  Speers,  433         761 

V.  Bank  ot  Fayetteville     ...     3  Jones,  Law,  450 666 

V.  Bank  of  State  of  S.  Carolina  1  Rich.  S.  C.  n.  s.  63      ....     718 

V-  Bank  of  Tennessee   ....     5  Baxt.  101 643,  718 

V   Clark 4  Ind.  316 183,  190,  567 

V.  Commercial  Bank     ....  6Sm.&M218    98,  n.  19, 105,761,  762 


Ixxvi  TABLE   OP    CASES. 

[All  references  are  to  Sections.] 

State  V.  Commissioners  of  Mansfield    .    3  N.  J.  500 55 

V.  Cook 3  Vroom,  347 II.  141  / 

i;  Curtis 35  Conn.  374 II.  157 

r.  Davis 50  How.  447 1G9 

t;.  Essex  Rank 8  Vt.  489 760,761 

r.  First  National  Bank  of  Jcf- 

fersonville 89  Ind.  302 720 

f.  Franklin  Bank  of  Columbus  .     10  Ohio,  91 716 

r.  Fuller 34  Conn.  280     ...     II.  141,  II.  159 

r.  Casting 23  La.  An.  1G09 II.  159 

V.  Gates G7  Mo.  139 421,  n.  21 

r.  Ilaight 2  Vroom,  399 11.141/ 

i:  Hart 2  Vroom,  434 II.  141  / 

V.  Keeter 80  N.  C.  472 298 

V.  Lincoln  Savings  Bank  ...     14  Lea,  42 3 

r.  IMorgan 35  La.  An.  293 298 

V.  Morris  R.  Co 3  N.  J.  3G0 43 

i".  National  Bank  of  Baltimore  .    33  Md.  75 IL  141  «,  144 

V.  Newark 39  N.  J.  (10  Vroom)  380     .      II.  141  q 

1-. 40N.  J.  (11  Vroom)  558     .      IL  141  7 

1-.  Norris 15  S.  C.  241 290 

V.  Seneca  Co.  Bank 5  Ohio  St.  171 761 

V.  Stimpson 4  Zabr.  9 172 

V.  Van  Felt 1  Cart.  304 27 

V.  Williams 8  Tex.  255 13 

;;.  Wilson 7  Craneh,  164 6 

State  Bank  v.  Aersten 3  Scam.  135 650 

y.  Armstrong 4  Dev.  510     .     .     .     324,327,328,340 

;;.  Bank  of  the  Capitol ....    41  Barb.  343 232 

V.  Chetwood 3  Halst.  1      ....     23,  33,  40,  42  c 

V.  Coquillard 6  Ind.  232 49 

V.  i'earing IG  Pick.  533 477 

V.  Fox 3  Blatchf.  431 158 

V.  Kain 1  Breese,  45 174,  297 

V.  Lock 4  Dev.  529 19,  297 

V.  Napier 6  Humph.  270 230 

i:  State 1  Blackf.  279 760,  761 

V.  Van  Horn 1  Soutli.  382 644 

V.  Wheeler 21  Ind.  90 158 

State    Board    of   Agriculture   v.   City 

Street  Railway  Co 47  Ind.  407 745 

State    National    Bank    v.   Freedmen's 

Saving  &  Trust  Co 2  Dill.  11 460 

V.  Reilly 3  111.  455 388 

State  Savings  Association  v.  Boatman's 

Savings  Bank 11  Mo.  App.  292   ....       522,561 

State  Treasurer  v.  Mann 34  Vt.  371 27 

Stearns  v.  Brown 1  Pick.  531 309 

Stebbins  v.  Piiocnix  Fire  Ins.  Co.      .     .     3  Binncy,  394 713 

Steckel  v.  First  National  Bank  of  Allen- 
town  93  Pa.  St.  370 145 

Steele  y.  Russell 5Neb.  211 234 

Stein  V.  Richardson 37  L.  J.  Ch.  3G9 006 


TABLE  OF  CASES.  Ixxvil 

[All  references  are  to  Sections.] 

Stephenson  v.  Mount 19  La.  An.  295 454 

Sterling  v.    Marietta    &    Susquehanna 

Trading  Co 11  Serg.  &  R.  178  .     103,  144,  179,  246 

Sterrett  v.  Kosencrantz 3  Phila.  54 421,  n.  14 

Stetson  V.  City  Bank 12  Oiiio  St.  577 42 

I'.  City  of  Bangor 56  Me.  274 II.  100 

V.  Excliange  Bank 7  Gray,  425 336 

V.  Kempton 13  Mass.  282 43 

Stevens  y.  Board  of  Education     .     .     .     78  N.  Y.  183 565 

V.  Hill 29  Me.  133 120 

V. 5  Esp.  247 418 

V.  McNeil 26  Barb.  051 393,  425 

V.  Monongahela  National  Bank  .  88  Fa.  St.  157   .  128,  753,  763,  IL  130  6 

V.  Park 73  111.  387 373,  421,  546 

V.  Reeves 9  Pick.  198   ......     .      9,  n.  3 

V.  Stevens 2  Hun,  470 608 

Stewart  i-.  Fry 7  Taunt.  339 493 

f.  Huntingdon 11  Serg.  &  R.  267 103 

V.    National    Union    Bank    of 

Maryland 2  Abb.  U.  S.  424  .     .     .      750,  II.  129 

V.  Smith 17  Ohio  St.  82 442 

V.  State 42  Tex.  242 290 


Stiltz  V.  Interweiler 1  Wilson,  (Ind.)  507  .     .     .       II.  141  I 

Stimpson  v.  Vroman 99  N.  Y.  74 547 

Stockton  I'.  Mechanics  &,  Laborers'  Sav- 
ings Bank 32  N.  J.  Eq.  163 566,  632 

Stone  V.  Bishop 4  Cliff.  593 610 

V.  Marsh Ry.  &  M.  364 435 

Stoney  v.  American  Life  Ins.  Co.     .     .     11  Paige,  635 98,  n.  35 

Strain  I'.  Gourdin 11  N.  15.  Reg.  156 493 

Strange  i-.  Lee 3  East,  490 29 

Strauglian  v.  Fairchild 80  Ind.  598 600 

Straus  V.  Tradesmen's  National  Bank  .     36  Hun,  451 325 

Stribbling  v.  Bank 5  Rand.  132 14 

Strong  V.  Grand  Trunk  R.  R.  Co.     .     .     15  Mich.  205 9,  n.  7 

V.  King 36  111.  9 421 

I'.  Stewart 9  Heisk.  137 272 

Stuart  V.  Commonwealth 8  Watts,  74 334 

V.  Earl  of  Bute 3  Ves.  Jr.  212 606,  654 

Sturdy  v.  Henderson 4  B.  &  Aid.  592 636 

Sturges  V.  Bank  of  Circleville .     ...  11  Ohio  St.  153      .     157,  160,  167,  171 

V.  Burton 8  Ohio  St.  215 128 

V.  Fourth  National  Bank  ...     75  111.  595 406 

Sturtevant  v.  Foord 4  Scott,  N.  R.  668 443 

Stuyvesant  Bank  v.  National  Meclian- 

ics'  Banking  Association 7  Sandf  97 351 

Suffell  y.  Bank  of  England 7  Q.  B.  D.  270 061 

Suffolk  Bank  v.  Lincoln  Bank      ...     3  Mason,  1 637,  646,  647 

Sullivan  v.  Lewiston  Institution  ...     56  Me.  507 620 

Supervisors  of  Albany  Co.  t'.  Stanley   .     105  U.  S.  305 II.  141  w 

Susquehanna  Ins.  Co.  v.  Perrine  ...     7  Watts  &  S.  348 43 

Susquehanna  Valley  Bank  r.  Loomis    .     85  N.  Y.  207 422 

Sutcliffe  I'.  McDowell 2  N.  &  M.  251 393 


Ixxviii  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Sutherland  v.  First  National   Bank  of 

Ypsilaiiti 31  Mich.  230 214, 217 

Sutton  V.  Toomer 7  Barn.  &  Cr.  41G 380 

Sutton's  Hospital 10  Co.  306 62 

Swall  V.  Clark 51  Cal.  227 666 

Swan  V.  Scott 11  Serg.  &  R.  164 747 

Swartwout  1-.  Mechanics' Bank    .     .     .     5  Denio,  555 604 

Sweeny  r.  Boston  Tive  Cents  Savings 

Bank 116  Mass.  384 608 

V.  Easter 1  Wall.  106 583,  591,  593 

Sweet  V.  Barney 23  N.  Y.  335 179 

V.  Stevens 7  R.  I.  375 390 

V.  Titus 4  Hun,  639 546 

Sweetser  v.  Hay 2  Gray,  49 19 

Swett  V.  Colgate 20  Jolins.  110 103 

Swift  V.  Tyson 16  Pet.  1 10,  565 

Syracuse,  Binghampton,  &  New  York 

R.  R.  Co.  V.  Collins 57  N.  Y.  641 421 


T. 

Tabor  v.  Perrot 2  Gall.  565 240,  265,  272 

Talbot  r.  Rochester 1  Hill,  295     .     .     .     248,  395, 474,  476 

Talledcga  Ins.  Co.  v.  Woodward  ...     44  Ala.  287 299 

Talmage  v.  Tell 3  Seld.  328 50,  73,  77 

Talman  r.  Rochester  City  Bank  .     .     .     18  Barb.  123 63 

Tancil  v.  Seaton 28  Gratt.  GOl 654 

Tankersly  v.  Graham 8  Ala.  217 576 

Tapley  y.  Martin 116  Mass.  276    .     33,  38,  II.  102,  106  a 

Tappan  r.  Merchants' National  Bank    .     19  Wall.  490 11.141/ 

Tassell  v.  Cooper 9  C.  B.  509 343 

Tate  V.  Hilbert 2  Ves.  Jr.  118    .     .    400,  550,  Oil,  612 

V.  Lcithead Kay,  650 550 

Tay  V.  Concord  Savings  Bank      .     .     .    60  N.  II.  277 440  A 

Taylor  y.  Bank  of  Kentucky    ....     2  J.  J.  Marsh.  568 33 

r.  Cook 14  Iowa,  501 639,  651 

c.  Dobbins 1  Strange,  .399 365 

c.  Griswold 2  Green,  N.  J.  223 43 

r.  Ilutton 43  Barb.  195     ...     .     12-3,  II.  109 

V.  i\Ianufacturing  Co     ....     82  111.  579 234 

r.  Miami  Exporting  Co.     ...     6  Hamm.  176 716 

r.  Moseley 0  C.  &  P.  273 481 

V.  Scrivens 1  Beav.  571 395  A 

y.  Sip 30  N.  J.  284 389,  421 

r.  Williams 11  Met.  44 546 

V.  Wilson 11  Met.  51 240,  544 

Ten  Brook  v.  Brown 17  Ind.  410 608 

Terhume  v.  Bank .34  N.  J.  Eq.  367     ...     .      509,  587 

Terrell  v.  Branch  Bank 12  Ala.  502 130,  179 

Terry  ?'.  Merchants  &  Planters'  Bank  .     06  Ga.  177 14 

Teutonia  National  Bank  of  New  Orleans 
V.  Loeb 27  La.  An 325 


TABLE   OF   CASES. 


Ixxix 


[All  references  are  to  Sections.] 
Thatcher  v.  Bank  of  State  of  New  York     5  Sandf.  121  .     98,  n.  20,  101,  174,  178, 


V.  West  River  National  Bank 


Tliayer  r.  Boston 

Tlie  City  of  Washington 

Tlie  Distillery  Spirits 

The  Floyd  Acceptance 

Theological  Seminary  of  Auburn  v.  Cole 
Third  National  Bank  v.  Allen  .... 

V.  Blake 

V.  Clark 

V.  Harrison 

Third   National  Bank  of  Baltimore  i'. 

Boyd 

Third  National  Bank   of  Louisville  v. 

Vicksburg  Bank 

Third  National  Bank  of  Philadelphia  v. 

Miller 

Thomas  v.  Farmers'  National  Bank 

V.  Fenton 

V.  Hopper 

V.  Todd 

Thomaston  Bank  v.  Stimson     .... 
Thompson  v.  Bank 


19  Mich.  190 
19  Pick.  516 . 
92  U.  S.  31  . 
11  Wall.  356 
7  Wall.  600  . 
18  Barb.  360 
39  Mo.  310  . 
73  N.  Y.  260. 
23  Minn.  263 
3  McCrary,  316 

44  Md.  27      . 

61  Miss.  112 


V.  Bell 

V.  Giles 

1-.  Pitman     , 

V.  Eedman 

V.  Riggs 

V.  Young 

Thorndike  v.  Stone 

Thornton  v.  Lane 

Thorpe  r.  Owen 

V.  Wegefarth 

Thrall  v.  Newell 

Threlfal  v.  Giles 

Thweat  v.  Bank  of  Hopkmsville  . 
Ticonic  Bank  v.  Johnson  .  .  , 
Tierman  v.  Commercial  Bank  ,  . 
V.  Jackson 


Tiffany  v.  National  Bank  of  ^Missouri 

Tillinghast  r.  Wheaton 

Timmis  v.  Gibbins  ...  ... 

Tinkham  v.  Hayworth 

Tippets  r.  Walker 

Titus  t'.  Mechanics'  National  Bank   . 
Tobacco  Pipe  Makers  v.  Woodroffe 
Tobey  v.  Manufacturers'  Bank     .     . 

Tockusch  V.  Towsey 

Toll's  Appeal 

Torabigbee  R.  R.  Co.  v.  Kneeland    . 
Tomkins  v.  Saltmarsh 


8  Pa.  St.  241 
46  Md.  43 
5  D.  &  L.  28 

5  Ala.  442 

6  Hill,  340 
21  Me.  195 
82  N.  Y.  1 

3  Hill,  77  . 
26  Eng.  L.  &  Eq 
2  Barn.  &  Cr.  422 

1  Fost.  &  F.  339 
11  M.  &  W.  487 
5  Wall.  663 

2  Ham.  334  .  . 
11  Pick.  183.  . 
11  Ga.  459  .  . 
5  Beav. 224  .  . 
56  Pa.  St.  82  . 
19  Vt.  202  .  . 
2  M.  &  Rob.  492 
81  Ky.  1  .  .  . 
21  Me.  426    .    . 

7  How.  Miss.  648 
5  Pet.  580      .     . 
18  Wall.  409      . 

8  R.  I.  530  .  . 
14  Eng.  L.  &  Eq. 
31  III.  519      .    , 

4  Mass.  595  .  . 
35  N.  J.  L.  588  . 
7  Barn.  &  Cr.  838 
7  R.  I.  236  .  . 
51  Tex.  129  .  . 
91  Pa.  St.  434  . 
4  How.  U.  S.  16 
14  Serg.  &  R.  275 


536 


184 


64 


179,  557 

II.  106  a 

102,  n.  9 

.  9,  n.  10 

109,  134 

.  505 

.   76 

.  489 

II.  128 

.  217 

136  a 


59,  77,  II.  108  a 


285 


193 


670 


II.  1 


,  289, 


30,  n.  55 
II.  144 
.  380 
.  334 

637,  659 
.  74 
322,  395  A,  414 
265 

98,  n.  20 
.  583 
.  552 
.  335 

312,  568 
.  27 
.   50 

679,  687 
.  610 

',  II.  144 
.  477 

589,  629 
.  748 
.  334 

274,  285 
.  550 
IL  130 
.  612 
.  662 

248,  568 
.   71 

272,  569 
.  43 
.  334 
.  248 
.  715 
46,63 
.  194 


',  675, 
63 
289, 


265, 


265, 


IXXX  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Tower  v.  Appleton  Bank 3  Allen,  387 648 

Town  of  Concord  v.  Concord  Bank  .     .     IG  N.  II.  2G 295 

Town  of  Kagle  v.  Kohn 84  111.  292 5G5 

Town    of  East    Hartford   v.   American 

National  Bank 49  Conn.  539 317 

Town  of  Learcy  I'.  Yarnall 47  Ark.  280 758 

Towne  v.  Rice 122  Mass.  G7 12,  n.  18 

Townsend  v.  Bank  of  Hacine  ....     7  Wis.  185 6G2 

V.  Billinge 1  Hilt.  353 393 

V.  Webster  Five  Cents  Savings 

Bank 9  N.  E.  R.  521  (Mass.)    ....     342 

Towson  r.  Havre  de  Grace  Bank      .     .     6  Har.  &  J.  47 14,  637 

Tracy  v.  Talniage 18  Barb.  402 72 

V. 4  Kern.  1  (12 757 

Traders'  Bank  v.  Campbell      ....     14  Wall.  87 II.  152 

Tradesman's  Bank  v.  Mcrritt  ....     1  Paige  302 300 

Tradesman's   National  Bank   i".    Third 

National  Bank 66  Pa.  435 406 

Trangiac  r.  Ardcn 10  Johns.  293 015 

Tremont  Bank  v.  Paine 28  Vt.  24 144 

Trentcl  i'.  Barandon 8  Taunt.  100 593 

Trimbey  v.  Vignier 1  Bing.  N.  C.  151  .     .     .     .      12,  n.  13 

Trinidad  National  Bank  v.  Denver  Na- 
tional Bank 4  Dill.  290 252,  578 

Tripp  V.  Curtenius 36  Mich.  494      ....  299,  302,  303 

— : r.  Swanzey  Paper  Co 13  Pick.  291 365 

Troy  City  Bank  v.  Grant 77  N.  Y.  305 454 

True  f.  Thomas 16  Me.  36 359 

Trustees  of  Dartmouth  College  v.  Wood- 
ward   4  Wheat.  636 6 

Tryon  v.  Oxley 3  G.  Green,  289 432 

Tucker  Manuf.  Co.  v.  Fairbanks  ...     98  Mass.  101 593 

Tueley  r.  Thomas 8  Car.  &  P.  104 9,  n.  16 

TurnbuU  v.  Bowyer 40  N.  Y.  450 477,  487 

Turner  v.  Bank  of  Fox  Lake    ....  23  How.  Pr.  399,  3  Keyes,  425        240, 

247,  544,  567 
V.  First  Nat.  Bank  of  Keokuk    .  26  Iowa,  562      .     , 


Tuttle  j;.  Frelinghaysen 38N.  J.  Eq.  12, 

1>.  Walton IGa.  43    .     .     , 


Tweddle  v.  Atkinson 30  L.  J.  Q.  B.  265 

Tyson  v.  State  Bank 6  Blackf.  225     . 


191, n.  150  c 
...  626 
.  .  .  698 
...  499 
52,  252,  272 


u. 

Uhl  V.  Harvey 78  Ind.  26 675 

Ullman  v.  Barnard 7  Gra}',  554 576 

Union  Bank  v.  Clossoy 11  Johns.  182 23,  24 

V.  Ellicott 6  Gill  &  J.  363 037,  641 

V.  Knapp 3  Pick.  96      .      11.%  290,  291,  294,  205 

r.  Johnson 9  Gill  &  J.  297 591 

V.  Laird 2  Wheat.  390    ....  699,  701,  713 

V.  Middlebrook 33  Conn.  100 468 


TABLE   OF   CASES.  IxXXl 

[All  references  are  to  Sections.] 

Union  Bank  v.  Planters'  Bank     ...    9  Gill  &  J.  439  .  .     .     .    9,  n.  17,  322 
,,.  ijidgely 1  Har.  &  G.  413  .     .     .  16,  20,  27,  43 


Union  Gold  Hill  Mining  Co.  v.  Rocky 

Mountain  National  Bank 06  U.  S.  640 II.  129 

Union,  &c.  v.  Kocky 2  Col.  248 171 

Union  National  Bank  i;.  BaUlenwick     .     45  111.  375 489 

V.  Cliambers 9  fliila.  131 466 

V.  Hunt 7  Mo.  App.  22 50,  77 

y  Mathews 98  U.  S.  625    48,72,750,754,755,758, 

II.  128,  144 

V.  Ocean  Co.  Bank 80  111.  212     ...    375,  398,  494,  530 

f.  Rowan 23  S.  C.  339 72 

i:  Sixth  National  Bank     ...    43  N.  Y.  452 454 

United  German  Bank  v.  Katz  ....     57  Md.  128 751 

United  Society  w.  Underwood  .     .     .     .  9  Bush,  (Ky.)  609.     .     .     .      128,130 

United  States  v.  Bank  of  jNIontreal  .     .     21  Fed.  Rep.  236 4 

V.  Bartow 20  Blatchf.  351 II.  159 

V.  Book 2  Cranch  C.  C.  294 298 

v.  Britton 107  U.  S.  655 II.  159 

V.  Buchanan 8  How.  83,  102 9,  n.  5 

V.  Central  National  Bank  ...  15  Fed.  Rep.  222  ...     .      II.  141  v 

.  ,;. 24  Fed.  Rep.  577   ...     .      II.  141  v 

V.  City  Bank  of  Columbus     .     .  21  How.  356     .   152,  154,  159,  167,  171 

V.  Clinton  National  Bank  ...     28  Fed.  Rep.  357 489 

V.  Cook  Co.  National  Bank   .     .  11  Leg.  News,  344     ..     .      IL  150  c 

V. 9Biss.  55 IL  150  c 


V.  Cutts 1  Sumner,  133 713 

V.  Eckford 6  Wall.  484 632 

V.  Fish 24  Fed.  Rep.  585 II.  159 

r.  Kirkpatrick 9  Wheat.  720 38,  489 

V.Knox 102U.  S.  422 IL112  6 

u.  Lee 12  Fed.  Rep.  816   .     .     .     .     .II.  159 

V.  Mann 17  Alb.  L.  J.  85 IL  200 

V.  National  Bank 6  Fed.  Rep.  134 489 

V.  Nat.  Bank  of  the  Republic     .     2  Mackey,  289 489 

V.  Rhawn 33  Leg.  Int.  258 II.  200 

V.  State  Bank 96  U.  S.  30 590,  752 

r.  Taintor 11  Blatchf.  374 IL  159 

V.  Thompson 98  U.  S.  46 489 

V.  Warner 26  Fed.  Rep.  616 II.  159 

V.  Wilson 100  U.  S.  620 II.  141  u 

United  States  National  Bank  v.  Burton     58  Vt.  426 233,  255 

Upham  V.  Lefavour 11  Met.  174 562 

Upton  V.  National  Bank  of  S.  Reading  .     120  Mass.  153 75,  IL  128 

V.  Tribilcock 91  U.  S.  50 89 

Utica  Ins.  Co.  v.  Bartow 6  Cow.  290 13 

y.  Bloodgood 3  Wend.  6-52 743 

V.  Cadwell 3  Wend.  296 743 

r.  Kip 8  Cow.  20,  3  Wend.  80   ...     .     743 

V.  Lynch 11  Paige,  .520 590 

V.  Scott 8  Cow.  709 13 

V. 19  Johns.  1 743 

VOL.    I.  / 


Ixxxii  TABLE    OF    CASES. 

[All  references  are  to  Sections.] 

V. 

Vail  V.  Newark  Savings  Inst 32  N.  J.  Eq.  627    ..     .  186,  629,  630 

Vaisey  v.  Reynolds 6  Russ.  12 006 

Valk  V.  Crandall 1  Sandf.  Ch.  179 144 

Vallett  V.  Parker G  Wend.  615 745 

Van  Allen  v.  American  Nat.  Bank    .     .     52  N.  Y.  1 344,  507,  590 

V.  The  Assessors       3  Wall.  573 II.  141  d,  y 

Van  Amee  v.  Bank  of  Troy     ....     8  Barb.  312 699 

Van  Antwerp  v.  Ilurlburd 7  Blatchf.  426, 

8  Id.  282    ...    II.  116,  145,  150  a 

Van  Bibber  r.  Bank  of  Louisiana      .     .  14  La.  An.  481  .     .     474,494,511,536 

Van  Dyck  v.  McQuado 18  Hun,  370 632 

Van  Leuven  v.  First  National  Bank     .  54  N.  Y.  671 .      52,  144,  n.  10,  IL  108  h 

Van  Keonisdyk  v.  Kane 1  Gall.  371 10 

Van  Wart  v.  Woolley 3  Barn.  &  Cr.  439  .     .     .  252,  205,  277 

Vance  v.  Bank 1  Blackf.  80 14 

V.  Lowtber 1  Ex.  D.  170 485 

Vanderberg  v.  Palmer 4  Kay  &  Johns.  204 610 

Vanderzee  i'.  Willis 3  Brown  C.  C.  21 325 

Vansands  v.  Middlesex  Co.  Bank     .     .    26  Conn.  144 701 

Vanzant  v.  Arnold 31  Ga.  210 12,  n.  16 

Vaugim  V.  Menlove 3  Bing.  New  Cas.  468     ...     .     194 

Veazie  Bank  v.  Fenno 8  Wall.  533 141,  IL  100 

V.  Winn 40  Me.  62 391,  421,  425 

Venango  National  Bank  v.  Taylor   .     .     56  Pa.  14 338 

Vere  r.  Lewis 3  T.  R.  182 370 

Vermilye  y.  Adams  Express  Co.  .     .     .     21  Wall.  130 9,  n.  9 

Vermont   &   Canada    Railroad    Co.   v. 

Vermont  Central  Railroad  Co.     .     .     34  Vt.  2 728 

Vernon  v.  Bovery 2  Siiow.  296 447 

V.  Hankey 2  T.  R.  287 400  A 

Vickrey  v.  State  Savings  Association    .     21  Fed.  Rep.  773 592 

Vidal  V.  Mayor 2  How.  128 76 

Viets  1-.  Union  National  Bank  of  Troy      101  N.  y.  503 344 

Vilas  Nat.  Bank  of  Plattsburg  v.  Strait     58  Vt.  448 144 

Village  of  Port  Jervis  v.  First  National 

Bank  of  Port  Jervis 90  N.  Y.  550 140 

Vining  r.  Bricker 14  Oiiio  St.  331 734 

Virginia  Coupon  Cases 114  U.  S.  209,  234 51 

Vose  V.  Grant 15  Mass.  505 717 

Voss  V.  German  American  Bank ...     83  111.  699 562 


W. 

Waco  National  Bank  ?'.  Rogers    .     .     .  51  Texas,  006 II.  141,  s 

Wade  V.  American  Colonization  Soc.    .  7  Sm.  &  JMar.  697 76 

r.  New  Orleans  Canal  Co.      .     .  8  Rob.  La.  140 049 

?•.  Withington 1  Allen,  561 480 

Wade's  Case Rep.  Pt.  5,  14  a 447 

Wainwright  v.  Weber 11  Vt.  676 .662 


TABLE    OF    CASES.  Ixxxiii 

[All  references  are  to  Sections.] 

Waite  I'.  Dowley 94  U.  S.  527 11.  141  A 

Walker  v.  Bank 9  N.  Y.  (5  Seld.)  582       ....     252 

v.  British  Guaranty  Association     18  Q.  B.  277 42 

V.  Chapman 22  Ala.  116 19 

V.  Manhattan  Bank 25  Fed.  Rep.  247    ...     .      204,  317 

v.  Rostron 9  M.  &  W.  411 313,398 

V.  St.  Louis  National  Bank    .     .     5  Mo.  App.  204 103 

V.  Walker 91  U.  S.  704,  5  Heisk.  425  .     .     .     247 

Wall  V.  Provident  Institution   ....     3  Allen,  96 620 

Wallace  v.  Kelsall 7  M.  &  W.  242 485 

Wallis  1-.  Littell 5  Law  T.  Rep.  n.  s.  489      ...    390 

V.  Manhattan  Co 2  Hall,  495 319 

Walls  V.  Bailey 49  N.  Y.  4G4 9,  n.  12 

Walsh  V.  Gladstone 1  Phil.  Ch.  C.  294 554 

Walter  V.  Dolan 26  Am.  Law  Reg.  25  (U.  S.)  .     .     590 

V.  Ford 74  Mo.  195 550 

Walters  v.  Brown 15  Md.  292 233 

Ward  V.  Johnson 95  111.  215     ...     .  63,  186,  618,  750 

V.  Northern  Bank 14  B.  Monr.  351 231 

V.  Smith 7  Wall.  447 214,  247,  637 

t'.  Turner 2  Ves.  Sen.  443 611 

Warden  v.  Howell 9  Wend.  174 565 

Ware  v.  Street 2  Head,  609 644,  662 

Warhus  v.  Bowery  Savings  Bank     .     .     21  N.  Y.  546 620 

Waring's  Admr.  v.  Edmonds    ....     11  Md.  424 608 

Warner  v.  De  Witt  Co.  National  Bank    4  111.  App.  305 750 

V.  Sauk  County  Bank  ....     20  Wise.  492 193 

Warren  v.  Oilman 17  Me.  860 233 

V.  Shook 1  Car.  &  P.  59 4 

Warren  Bank  v.  Suffolk  Bank      ...  10  Cush.  583  (Mass.)  .    102,  n.  17,  220, 

Warrensburg    Co-operative     Building  236,  265,  269 

Association  r.  Toll 83  Mo.  94 421 

Warwicke  v.  Noakes Peake  N.  P.  98 895 

Washington  Bank  v.  Lewis       ....     22  Pick.  24 103,  134,  136 

Washington  County  National  Bank  v. 

Lee 112  Mass.  521 IL  106  a 

Waters  r.  Bank  of  Georgia   *  ....     R.  M.  Charlt.  193 649 

Watervliet  Bank  v.  White 1  Den.  608 419 

Watriss  v.  First  National  Bank  of  Cam- 
bridge     124  Mass.  571 II.  144 

Watson  V.  Bennet 12  Barb.  196       ....  102,  n.  9,  169 

V.  Phcpnix  Bank 8  Met.  217     .      291,  294,  295,  311,  322 

r.  Poulson 7  Eng.  L.  &  Eq.  585,  15  Jur.  1111     389 

V.  Russell 3  B.  &  S.  34 398 

AVatts  V.  Christie 11  Beav.  546      .     .   289,  313,  326,  338, 

458,  668 

Wayne  v.  Commercial  National  Bank  .  52  Pa.  St.  343    ....     21,  37,  42  c 

Wear  r.  Lee 87  Mo.  358 421 

Weaver  v.  Nixon 69  Ga.  699 544 

Weber  v.  Weber 9  Daly,  211 610 

Webster  v.  Howe  Machine  Company    .     54  Conn.  394 748 

Weckler  v.  First  National  Bank   ...  42  Md.  58      .     .    59,  77,  103,  II.  108  a 

Wedlake  v.  Hurley 1  C.  &  J.  83 493 


Ixxxiv  TABLE   OF   CASES. 

[All  references  are  to  Sections.] 

Weed  V.  Bond 21  Ga.  195 565 

V.  ranama  Kailroad  Company  ,     17  N.  Y.  362 102 

Weinstock  v.  Bellewood 12  Bush,  13'J 494,  532 

Weisinger  v.  Bank 10  Lea,  330 290 

Welch  V.  German  Americ-an  Bank    .     .     73  N.  Y.  424 472,  473 

V.  Goodwin 123  Mass.  71 464 

V.  Seymour 28  Conn.  387 27 

Weld  V.  City  of  Bangor  .....     59  Me.  416 IL  141  a 

r.  Gorham 10  Mass.  o(J6 9,  n.  9 

Wellington  v.  Jackson 121  I\Lass.  157 468 

Wells  V.  Brigham 6  Cush.  0 372 

V.  Morrison 91  Ind.  51 546 

V.  Tucker 3  Binn.  366 608,  Oil 

Welton  V.  Adams  &  Co 4  Cal.  37 299,  049 

Wendell  v.  French 19  N.  H.  213 309 

V.  Washington  &  Warren  Bank     5  Cow.  161 645 

Werk   V.  Mad    Kiver    Valley   Branch 

Bank 8  Ohio  St.  301 421 

West  V.  American  Exchange  Bank  .     .    44  Barb.  175 599 

r.  Errol 58  N.  H.  233 752 

v.  First  Nat.  Bank  of  Elmira     .     20  Hun,  408 89 

West  Brand)  Bank  i-.  Fulmer      ...     3  Barr,  399 227,  232 

West  St.  Louis  Savings  Bank  v.  Shaw- 
nee County  Bank 95  U.  S.  557       ....  156,  158,  169 

Western,  &c.  R.  K.  v.  Franklin  Bank    .     60  Md.  351 ,     .     .     103 

Western  Bank  v.  Gilstrop 45  Mo.  419 159 

V.  Mills 7  Cush.  539 746 

Western  Reserve  Bank  >•.  Mdntyre      .     40  Ohio  St.  52 IL  144 

Westfall  V.  Braley 10  Ohio  St.  188  662 

Westminster  Bank  v.  Wheaton     .     .     .     4  R.  I.  30 380,  383,  385 

Weston  V.  Barker 12  Johns.  276 499 

V.  Might 17  Me.  287 611,  612 

Wetherill  i:  Bank  of  Pennsylvania  .     .     1  Miles,  399 246 

Weyer  1-.  Second  Nat.  Bank  of  Franklin     57  Ind.  198 IL  112  a 

Wharton  v.  Morris 1  Dall.  125 299 

V.  Walker 4  Barn.  &  Cr.  163       185 

Wheatley  v.  Purr 1  Keone,  551 610 

V.  Strobe 12  Cal.  92 408,  495 

Wheeler  v.  Gould 20  Pick.  545 456 

V.  National  Bank 96  U.  S.  208      ....      II.  130  c,  d 

Wheelock  v.  Freeman 13  Pick.  105 485 

V.  Kost 77  111.  296      ....       II.  146,  150  d 

Whelan  v.  Childress 7  Ilumpli.  303 299 

Wliistler  v.  Forster 14  C.  B.  n.  s.  248       .     .  380,  482,  486 

Whitaker  v.  Bank  of  Entrland      ...     6  Car.  &  P.  700      .    431,  458,  459,  507 

AVhite  V.  Ambler 8  N.  Y.  170        373 

V.  Continental  National  Bank     .    64  N.  Y.  320 476,  477 

v.  Franklin  Bank 22  Pick.  181       ....     51,298,322 

V.  Howe 3:McLean,  111  .     .     .     ,     .      128,652 

r.  Knox Ill  U.  S.  784 IL  146 

r.  National  Rank 102  U.  S.  658 826,  593 

I'.  Springfield  Bank 3  Sand.  S.  C.  222 565 

■ V.  Springfield  Institution  ...     134  Mass.  232 474 


TABLE   OF    CASES.  l^XV 

[All  references  are  to  Sections.] 

Whitehead  v.  Walker 10  Mees.  &  Wels.  606      ....  227 

Whitesides  i'.  Northern  Bank  ....  10  Bush,  501 4S5 

Wliitman  v.  Cox 2G  Me.  335 688 

Whitniore  v.  Wilks 3  Car.  &  P.  364 480 

Wliitnash  v.  George 8  Barn.  &  Cr.  556 42 

Whitney  r.  Esson 99  Mass.  311      ....      9,  n.  8,  236 

1-.  First  Nat.  Bank  of  Brattleboro  50  Vt.  388 48 

V. 55  Vt.  154 200,  202 

V.  Ragsdale 33  Ind.  107 II.  141  e 


Wliittington  r.  Farmers'  Bank     ...     5  Har.  &  J.  480 717 

Wliitwell  V.  Johnson 17  Mass.  452 220,  231 

Whitworth  v.  Adams 5  Rand.  333 49 

Wickham  v.  Gatrill 2  Sm.  &  G.  353 42 

Wicks  V.  Hatch 62  N.  Y.  535 272 

Widgery  v.  Monroe 6  Mass.  449 220 

Wienholt  v.  Spitta 3  Camp.  376 398 

Wiesser  v.  Denison 10  N.  Y.  68  .     .  291,  463,  467,  468,  472 

Wiggin  V.  Freewill  Baptist  Church  .     .    8  Met.  301 113 

Wilcox  V.  Onondaga  Co.  Savings  Bank    40  Hun,  297 440  B 

Wild  V.  Bank  of  Passamaquoddy     .     .  3  Mason,  505     98,  n.  10,  156,  157,  158, 

171 

Wilder  v.  Union  National  Bank    ...  12  Leg.  News,  75  (Biss.)     .      II.  157  c 

Wilderman  v.  Rogers 7  Eastern  Rep.  786 434 

Wiley  V.  First  Nat.  Bank  of  Brattleboro    47  Vt.  546 191 

V.  Starbuck 44  Ind.  298 II.  130  d 

Wilkinson  v.  Griswold 12  Sm.  &  Mar.  669 207 

V.  Johnson 3  Barn.  &  Cr.  428  .     .     .     .      476,  488 

V.  Lutwidge 1  Str.  648 463 

Willetts  V.  Paine 43  111.  433     .     .  9,  n.  9,  312,  421,  n.  10 

!•.  Phoenix  Bank 2  Duer,  121  155,370,414,  n.  11,418,443 

Williams  r.  Clieney 3  Gray,  215 565 

r.  Everett 14  East,  582 398,  493 

;;.  Gillman 3  Green,  276 424 

V.  Griffitli 5  M.  &  W.  300 327 

r.  Hadley 8  East,  378 751 

i:  Hood 1  Phil.  205 422 

V.  Kelsey 6  Ga.  365 295 

V.  Mechanics'  Bank  .....  5  Blatchf.  C.  C.  59     .     .     .      701,  709 

V.  Riley 34  N.  J.  Eq.  398 173 

V.  Rogers 14  Bush,  788 289 

V.  Union  Bank 2  Humph.  339 14 

V.  Weaver 75  N.  Y.  30 II.  141  r 

V.  Williams 55  Wise.  300 604 

Williamson  v.  Johnson 1  Barn.  &  Cr.  149 439 

V.  Williamson L.  R.  7  Eq.  542 292 

Willing  V.  Consequa 1  Pet.  301 113 

Wilmot  V.  Hurd 11  Wend.  584 335 

Wilson  V.  Craven 8  M.  &  W.  584 29 

V.  Dawson 52  Ind.  513 186,  207,  562 

r.  Foree 6  Johns.  110 289 

y.  Goodwin Wright,  Oliio,  219 553 

V.  Holmes 5  Mass.  543 593 

V.  Smith 3  How.  U.  S.  763  .     250,  272,  591,  599 


IxXXvi  TABLE   OF    CASES. 

* 

[All  references  are  to  Sections.] 

AVilson  1-.  "Wysar 4  Taunt.  288 743 

AVincock  r.  Turpin 96111.135 692 

Wing  1-.  Mercliant .57  Me.  oS3 608 

Wingate  v.  Meciianics'  Bank   ....  10  Harr,  104  .     .     .     218,  252,  283,  295 

AVinsor  v.  Lafayette  Co.  Bank      ...     18  Mo.  App.  GG5 169 

"Winter  v.  Bank  o[  New  York  ....    2  Caines,  337 181 

V.  Belmont 53  Cal.  428 710 

v.  Drury 1  Seld.  525 493,  523 

r.  Winter 101  Eng.  C.  L.  097 608 

Winthrop  Savings  Bank  v.  Jackson      .     07  Me.  570 335 

Winton  v.  Little 94  Pa.  St.  04 144,  n.  13 

"Wirebach  1-.  First  National  Bank  .     .     .     97  I'a.  643 392 

Wisconsin   Marine  &  Fire  Ins.  Co.  v. 

Bankof  British  North  America    .     .  21  Upper  Canada  Q.  B.  284    .     .    225 

Wiswell  V.  Starr 48  Me.  401 693,  690 

Witte  V.  Vincenot 43  Cal.  325 290 

Witters  v.  Sowles 32  Fed.  Kop.  130    ...     .      130,  680 

AVittkowski  V.  Smith 84  N.  C.  671 230 

Witzel's  Case 2  Brad f.  386 610 

AVolstenholm  r.  Sheffield  Union  Bank- 
ing Co 54LawT.  R.  746 325 

Wood  V.  Boylston  National  Bank     .     .     129  Mass.  .358 326,  597 

V.  Dunimer 3  Mason  C.  C.  308 G93 

V.  Merchants'  Savings,  Loan,  & 

Trust  Co 41  111.  267 557 

V.  AVallace 24  Ind.  226 506 

V.  Warner 15  N.  J.  Eq.  81 12,  n.  7 

V.  Wood 1  Car.  &  P.  59 9,  n.  4 


Woodin  V.  Frazee 38  N.  Y.  Sup.  Ct.  190     ....    421 

Woodman  v.  Thurston 8  Cush.  157 425 

Woodruff  t;.  Erie  Railroad  Co.     ...     93  N.  Y.  018 730 

!•.  Hill 116  Mass.  310 12,  n.  13 

r.  Merchants' Bank 25  Wend.  673    .     9,  n.  9,  380,  381,  387 

v.  Munroe 33  Md.  158 464,  468 

r.  Plant 41  Conn.  344 421,  425 

Woods  V.  People's   National  Bank  of 

Pittsburg 83  Pa.  St.  57 II.  128 

l:  Schroeder 4  Har.  &  J.  276 393 

V.  State 10  Mo.  098 19 

V.  Thiedeman 1  11.  &  C.  478    .     .     .     .  225,  474,  557 

Woolen  1-.  New  York  &  Erie  Bank        .     12  Blatchf.  359 224 

Woolfolk  V.  Bank  of  America  ....     10  Bush,  504 485 

Woolley  V.  Loui.sville  Banking  Co.  .     .     87  Ky.  527 325 

Worcester  County  Bank  c  Dorchester, 

&c.  Bank 10  Cush.  488 652 

Work  V.  Tatman 2  Houst.  304 383 

Wray  v.  Tuskegee  Ins.  Co 34  Ala.  58 666 

Wright  V.  Boyd 3  Barb.  523 170 

V.  Douglas 10  Barb.  97 76 

V.  Field 7  Ind.  376 603 

r.  First  Nat  Bank  of  Greensburg    18  Alb.  L.  J.  115 IL  130 

V.  Georgia  R.  R.  &  Banking  Co.     34  Ga.  330 89 

V.  Laing 3  Barn.  &  Cr.  165 327 


TABLE  OF  CASES. 


Ixxxvii 


[All  references  are  to  Sections.] 

Wright  V.  Merchants'  National  Bank    .  3  Cent.  Law  J.  351 

V.  Keed 3  T.  R.  554   . 

V.  Kussell 2  Black,  934 

V.  Wilcox 19  AVend.  343 

Wroten  v.  Armat 31  Gratt.  228 

AVyckoffy.  Anthony 90  N.  Y.  442 


Wyer  v.  Dorchester,  &c.  Bank  .  . 
Wylie  V.  Northampton  Bank  .  .  . 
Wyman  v.  Citizens'  National  Bank  . 

V.  Colorado  National  Bank    . 

V.  Hallowell  &  Aug^^sta  Bank 


11  Cush.  51   . 

19  U.  S.  361 . 

29  Fed.  Rep.  734 

5  Col.  30  .     .     . 

14  Mass.  58  .     89,  98,  n.  22, 


II.  146 

.     637 

.      27 

102,  n.  9 

IL  128 

.     325 

.     652 

50,  202 

.     754 

.     594 

102,  n.  29, 

765 


Yeaton  i.  Bank  of  Alexandria      .     .     .  5  Cranch,  49 220 

York  Railway  Co.  v.  Hudson  ....  19  Eng.  L.  &  Eq.  361      ....     125 

Young  V.  Adams 6  Mass.  182     ...     .      289,  464,  659 

T V.  Axtell 24  Black,  242 131 

V.  Godbe 15  Wall.  562 12 

V.  Grote 4  Bing.  253 480 

Youngs  r.  Lee 18  Barb.  187 557,  599 


Z. 


Zantzingers  v.  Gunton 19  Wall.  32 II.  150 

Zelle  V.  German  Savings  Inst.      ...     4  Mo.  App.  401 329 

Zimmerman  v.  Rote 75  Pa.  St.  188 480 

Zinck  V.  Walker 2  W.  Bl.  1154 325 


BANKS   AND   BANKING. 


[All  references  are  to  sections,  throughout  the  book;  those  of  Part  II., 
upon  National  Banks,  being  preceded  by  II. ;  the  Second  Part  contains  a 
table  (II.  0),  by  means  of  which  ready  reference  may  be  had  to  the  poi- 
tions  of  this  book  that  concern  any  given  section  of  the  Revised  Statutes 
of  the  United  States ;  and  the  cases  that  construe  the  words  of  a  given 
section  of  the  banking  law  may  always  be  found  by  turning  to  that  sec- 
tion of  Part  II.  whose  number  is  100  plus  the  number  of  the  said  section 
of  the  banking  law. 

The  analysis  at  the  head  of  each  chapter  is  intended  as  something 
more  than  an  index.  Wherever  the  treatment  of  a  subject  in  the  text 
is  expansive,  great  care  has  been  taken  to  put  an  accurate  and  compressed 
statement  of  the  law  of  that  subject  in  the  analysis.  It  will  be  found 
useful  always  to  refer  to  the  analysis  as  well  as  the  text  in  seeking  the 
solution  of  a  problem  in  banking  law,  for  very  often,  by  reason  of  their 
having  been  drafted  from  differing  points  of  view,  they  mutually  eluci- 
date each  other;  and  the  references  in  the  analyses  to  sections  kindred 
in  subject  matter  or  principle  will  also  be  found  of  value.] 


CHAPTER  I. 

PRELIMINARY. 

§  0.   Analysis, 

§  1.   Scope  of  the  Book. 

Definitions. 
§  2.  General  definition  and  essentials. 

§  3.  Savings  Bank. 

§  4.  United  States  tax  definition. 

§  5.  State  and  National  Banks. 

Sources  of  the  Law  of  Banking. 
§  6.  Charter. 

n.  1.   Articles  of  association  equivalent  to. 
n.  2.   When  invalid. 

n.  3.   State  cannot  alter  or  repeal,  unless  power  is  reserved, 
n.  4.  Bank  has  no  powers  beyond  those  given  by  the  charter,  and  their 
incidents. 
VOL.  ill 


PRELIMINARY. 

§  7.   Statute  Law. 

State  Bank  and  United  States  statutes. 

State  Bank  and  State  statutes. 

National  Bank  and  State  statutes. 

National  Bank  and  United  States  statutes. 
§  8.   Common  Law. 
§  9.   Usage,  and  wliat  is  necessary  to  make  it  legally  binding. 

(a)  Great  care  is  necessary  in  relying  on  usage. 

(6)   The  real  question  is,  what  is  it  fair  to  presume  the  parties  intended. 

(c)  Valuable  rights  not  waived  without  assent. 

(d)  Usages  in  the  nature  of  contract  between  other  parties  are  extrin- 

sic, unless  clearly  intended  to  govern  the  transaction. 

(e)  Relation  of  the  parties,  as  selecting  the  bank  and  taking  advantage 

of  its  facilities,  or  merely  brought  into  contact  with  it  by  act  of 
anotlier.     §  9,  n.  19,  20. 
Foreseeing  that  the  bank  will  be  a  factor  in  the  transaction. 
No  one  is  bound  by  a  usage,  who  has  no  reason  to  contemplate  that 

he  will  be  brought  within  its  operation.     §  9  e;  §  243. 
Mode  of  dealing  between  the  parties. 
Actual  knowledge  of  a  usage. 
General  usage  of  the  banks  of  a  city. 

Usage  of  a  single  bank.     §  9,  n.  21 ;  %de;  §  9,  n.  19 ;  §  9  A  to  F. 
Change  of  usage.     §  9,  n.  1  c. 
Distinction   between   binding  usage  and  a  series  of  courtesies. 

§  9,  n.  1  c ;  §  583. 
Louisiana  definition  of  usage.     §  9,  n.  1. 
Proof  of  usage.     §  9,  n.  1  h,  and  n.  13 ;  §  222. 
A  usage  cannot  be  built  up  out  of  a  series  of  acts,  each  done  under 

special  authority.     §  97  (7). 
In  this  it  bears  a  resemblance  to  prescription ;  authority  by  usage 
is  authority  by  a  sort  of  prescription. 
Effect  of  Usage.     See  §  221. 

As  against  one  ignorant  of  the  usage.     §  9,  n.  8. 

As  in  favor  of  one  ignorant  of  the  usage.     §  9,  n.  3. 

Generality  of  usage  only  affects  the  question  of  knowledgci.    §  9, 

n.  18. 
A  usage  to  perform  an  act  is  not  equivalent  to  performance.    §  9, 

n.  17. 
A  usage  may  determine  the  question  of  negligence.     §  9,  n.  16. 
Usages  varying  Rules  of  Law.     §  9,  n.  9. 
Held  illegal  if  against  the  rules. 

(1)  demand  paper  has  grace. 

(2)  bank  must  pay  depositors  in  good  money. 

(3)  recovery  on  one  half  of  bank  bill. 

(4)  over-due  paper  subject  to  equities. 

(6)  money  paid  by  mistake  can  be  recovered. 
Held  legal,  though  against  rules. 

(1)  as  to  demand,  §  281,  notice,  §  233,  protest,  §  281. 

(2)  as  to  powers  of  bank  officers  and  agents. 
9 


ANALYSIS. 

(3)  that  collecting  bank  cannot  receive  anything  but  money. 

(4)  that  a  banker  must  know  the  signature  of  his  customers. 

(5)  as  to  negotiability  of  paper. 

(6)  as  to  what  constitutes  delivery. 

(For  other  examples  of  Usage,  see  Index,  Usage.) 
The  essential  principles  in  the  matter  of  Usage  are  three. 

(1)    CoNTEill'LATION. 

The  usages  of  a  bank  or  group  of  banks,  contemplated  as  a 
factor  in  the  agreement  at  the  time  of  contract,  form  a 
part  of  it.  But  if  an  institution  or  set  of  institutions  not 
within  the  contemplation  of  the  parties  at  the  time  of 
contracting  as  entering  into  the  agreement,  or  having  any 
part  to  perform  in  connection  with  it,  the  usages  of  such 
institution  or  institutions  form  no  part  of  said  contract. 
As  regards  the  usages  of  a  single  bank,  however,  this 
principle  must  be  received  in  connection  with  two  others 
following. 

(2)  Adoption. 

One  who  makes  use  of  the  facilities  of  a  bank  must  be  held 
by  its  usages,  particular  and  general :  he  adopts  the  bank, 
usages,  and  all;  he  cannot  expect  it  to  act  otherwise  than 
in  its  own  accustomed  manner,  and,  knowing  that  banks 
are  apt  to  have  their  special  methods  of  business,  it  is 
his  own  fault  if  he  does  not  inquire  into  them  before 
selecting  the  bank.  One  who  voluntarily  goes  on  board 
of  a  ship  bound  upon  its  usual  course  cannot  complain 
if  it  does  not  take  him  to  the  port  he  wished  ;  he  should 
have  inquired  of  the  proper  authorities  whither  it  was 
going. 

(3)  Adverse  Position. 

Where  A.  contracts  with  B.,  the  usages  of  B.  or  of  his  agents 
cannot  affect  A.,  unless  he  has  knowledge  of  them  at  the 
time  of  contract,  or  they  are  so  general  that  A.  must  be 
presumed  to  know  them.  In  respect  to  banks,  the  usages 
general  among  those  of  a  particular  locality  are  presumed, 
under  this  principle,  to  be  known,  but  not  the  special  usage 
of  each  single  bank.  So  that,  in  any  dealing  between  third 
parties,  if  the  bank  can  be  placed  distinctly  on  one  side  of 
the  agreement,  its  particular  usages  will  not  bind  the  other 
side  unless  known  to  it. 

For  example,  when  A.  takes  a  check  from  B.  upon  the  bank 
with  which  B.  deals,  B.  is  bound  by  the  special  usages  of 
the  bank,  under  principle  (2),  but  A.  is  not,  for  to  him 
(3)  applies.  So,  if  a  note  is  payable  at  bank  C,  the  usages 
of  C.  in  collecting  affect  the  maker,  under  (2) ;  but  if  a 
note  is  drawn  generally,  not  as  payable  at  a  particular 
bank,  and  the  holder  puts  it  in  bank  C.  for  collection,  the 
holder  is  bound  by  the  usages  of  C,  particular  as  well 
as  general,  but  the  maker  is  only  bound  by  the  general 

3 


PRELIMINARY. 

usages,  even  though  he  knows  the  special  usages;  for 
although  the  group  of  banks  in  the  place  where  the  note 
was  payable  was  contemplated  as  a  probable  factor  in 
the  collection,  the  special  bank  C.  was  not  contemplated, 
and  its  peculiar  usage  did  not  enter  the  agreement  at  the 
time  of  contract. 

In  brief,  if  I  employ  a  bank  to  act  for  me,  or  authorize  you 
to  employ  it  to  act  against  me,  I  am  bound  by  its  usage, 
whether  known  to  me  or  not. 

But,  in  other  cases,  where  I  come  in  contact  with  the  bank, 
merely  because  I  have  a  demand  against,  or  it  has  a  de- 
mand against  me,  I  will  not  be  bound  by  its  usage,  unless 
at  the  time  of  entering  into  the  contract  from  which  the 
claim  arises,  (1)  The  bank  was  contemplated  as  a  factor, 
and  (2)  I  either  knew  its  custom,  or  it  is  just  to  presume 
knowledge,  because  it  was  my  duty  to  inquire ;  and  this 
last  question  will  always  depend  for  its  answer  upon  the 
facts  of  each  new  class  of  cases  as  they  arise,  and  the 
judge's  sense  of  what  is  fair  and  just  under  the  circum- 
stances and  knowledge  will  not  be  presumed  so  as  to  take 
away  the  substance  of  valuable  legal  rights  without 
actual  consent,  but  only  where  the  effect  of  the  usage  is 
confined  to  varying  the  formal  law.  §  223. 
§  10.  Conflict  between  State  and  Federal  Courts. 
Force  of  State  decisions. 

Federal  courts  are  free  on  questions  of  general  commercial 
law,  construction  of  contracts,  extra-territorial  matters, 
and  from  State  decisions  that  are  clearly  unjust. 
Discharge  under  foreign  bankruptcy,  n.  4. 
Whether  the  bank  is  a  holder  for  value  of  a  note  is  a  question 
of  general  commercial  law,  upon  which  State  decisions 
do  not  conclude  the  Federal  courts,  n.  7. 
§§11  and  12.   Conflict  of  the  Laws  of  different  Sovereignties. 
Remedi/  is  governed  by  the  Lex  Fori. 

Practice,  Pleading,  Admissibility  of  Evidence,  Burden  of 
Proof,  Latent  or  Patent  Ambiguity,  Competency  of  Wit- 
nesses, Hearsay,  Parol  to  affect  writing,  and  what  facts 
the  admitted  evidence  proves ;  but  the  legal  effect  of  such 
facts  proved  may  depend  on  other  law,  as  that  of  the 
place  of  performance,  n.  2. 

Statute  of  Limitations,  n.  2. 

Statute  of  Frauds,  n.  2. 

Interpretation  of  Documents,  n.  3. 

Reahji,  the  effect  of  contracts  upon,  n.  4. 

Distinction  between  the  contract  as  a  contract,  and  its  effect 
on  property,  n.  5. 

One  domiciled  in  State  E.  may  be  estopped  in  another 
State  to  oppose  a  transaction  valid  by  the  law  of  E., 
n.  8,  9. 

4 


SCOPE   OF   BOOK.  §  1 

Movables,  effect  of  contract  upon,  n.  9,  10. 
(5)  Capacity  to  contract. 
(G)  Form  of  contract. 

(7)  Place  of  performance  governs  the  construction  and  validity 
of  a  contract. 
Place  of  payment  decides  usually. 

Seat  of  a  continuous  business  governs  the  obligations  of 
him  who  carries  on  the  business  arising  in  the  course 
of  the  business. 
Of  two  pgssible  laws,  that  most  favorable  to  the  contract  is 

applied. 
Scat  of  a  casual  contract. 

Place  where  a  contract  is  made  is  its  seat,  when  this  is  not 
otherwise  determinable,  and  the  place  of  dehreri/,  not  the 
place  of  sir/nin;/  or  datinrj,  is  the  place  of  making,  except 
as  to  bona  fide  parties  without  notice. 
The  law  governing  bills  and  notes,  liability  of  maker, 
drawer,  indorser,  acceptor,  grace,  demand,  protest,  no- 
tice. 
(Note    7)  Equity  will  compel  a  good  contract  to  be  made  in  some 

cases. 
(Note  15)  Interest  may  be  governed  by  the  law  of 
the  place  of  payment, 
the  place  of  making  the  contract, 
the  place  of  using  the  money. 

the  place  of  suit  as  to  interest  recovered  as  dam- 
ages. 
In  some  States,  the  Lex  Fori  governs  as  to  this  kind  of 
interest. 

§  1.  Scope  of  the  Book.  —  The  subject  of  this  volume  is 
that  portion  of  Substantive  ^  Law  which  relates  to  Banks  and 
Banking. 

In  its  narrowest  sense  this  would  include  only  such  part  of 
the  law  as  owes  its  existence  to  Banks  and  Banking.  We 
should  consider  those  combinations  of  fact  in  which  a  bank 
is  an  essential  2  element,  and  by  comparing  the  consequences 

^  §  1.  With  procedure  we  have  little  to  do  except  incidentally  in  the 
notes,  the  windows  of  the  book  through  which  we  may  look  upon  the 
world  of  law  beyond  its  limits. 

2  Essential  =  necessary  to  the  consequence ;  the  cause  or  a  part  cause 
of  the  legal  consequence  belonging  to  the  combination  of  facts  into  which 
it  enters,  in  such  sense  that  if  it  were  absent,  or  replaced  in  the  combi- 
nation by  any  fact  outside  of  banking,  the  consequence  would  not  be  the 
same. 

6 


§  2  PRELIMINARY. 

attached  by  the  law  to  the  facts  in  such  cases,  derive  by  induc- 
tion the  law  ])eculiar  to  banking. 

In  its  widest  sense  our  subject  would  include  all  law  appli- 
cable to  banks,  and  we  should  have  to  note  the  legal  conse- 
quences linked  to  every  combination  of  circumstances  into 
which  a  bank  could  enter  as  a  factor. 

"While  the  first  method  would  be  the  proper  one  if  the  book 
were  part  of  a  complete  and  connected  treatment  of  the  whole 
law,  it  would  exclude  very  much  that  is  of  every-day  use  in 
banking,  and  of  which  a  text-book  intended  to  be  used  by 
itself  should  speak.  Yet,  if  the  book  were  written  upon  the 
second  plan,  it  would  be  a  cyclopaedia  of  law.  The  sensible 
plan  seems  to  be,  to  group  in  one  volume  the  law  peculiar 
to  banks,  and  such  further  matter  as  is  of  frequent  appli- 
cation in,  or  has  a  vert/  importayit  bearing  upon,  their  busi- 
ness. 

This  we  shall  do,  first  defining  our  terms  and  noting  the 
sources  of  banking  law,  then  considering  the  law  of  Banks 
and  Banking  in  general,  and  finally  giving  our  attention  in 
Part  II.  to  the  national  banking  laws  and  their  construc- 
tion. 

Definitions. 

General  definition  of  a  Commercial  Bank  ....  §  2. 

Definition  of  Savings  Bank §  3. 

United  States  tax  definition  of  a  Bank      ....  §  4. 

State  Banks  and  National  Banks  defined  ....  §  5. 

§  2.  A  Bank  is  an  institution,  usually  incorporated,  with 
power  to  issue  its  promissory  notes  intended  to  circulate  as 
General  defi-  money  (known  as  bank  notes)  ;  or  to  receive  the 
Commerdai  ^oney  of  others  *"  on  general  deposit  (§  288),  to 
Bank.  form  a  joint  fund  that  shall  be  used  by  the  institu- 

tion for  its  oivn  benefit,  for  one  or  more  of  the  purposes 
(§  46  A)  of  making  temporary  loans  and  discounts,  of  deal- 
ing in  notes,  foreign  and  domestic  bills  of  exchange,  coin, 
bullion,  credits,  and  the  remission  of  money  ;  or  with  both 
these  powers,  and  with  the  privileges,  in  addition  to  these 
6 


DEFINITION   OF   BANK.  §  2 

basic  powers,  of  receiving  special  deposits,  and  making  col- 
lections for  the  holders  of  negotiable  })apcr,  if  the  institution 
sees  fit  to  engage  in  such  business. 

(Historically,  receiving  special  deposits  is  the  root  of  the 
banking  business,  but  it  is  now  of  little  importance  compared 
with  the  great  tree  that  looms  against  the  sky  of  nineteenth- 
century  civilization.) 

a.  "  Others  on  deposit."  A  man  using  his  own  funds 
to  discount  business  paper,  or  to  buy  exchange,  is  not  a 
banker  in  any  proper  sense;  nor  is  he  any  more  a  banker 
because  he  borrows  money  from  another,  and  uses  it  in 
the  same  way ;  it  is  essential  that  there  should  be  a  place 
ivhere,  as  a  regular  business,  the  money  of  others  is  re- 
ceived on  general  deposit.  There  must  be  a  combination 
of  moneys,  a  joint  fund,  as  a  primary  condition  of  the  exist- 
ence of  a  bank  or  banker,  or  the  transaction  of  a  banking 
business. 

Practically,  a  bank  is  a  place  where  deposits  are  received 
and  paid  out  on  checks,  and  money  is  loaned  on  security. 
If  the  institution  has  the  additional  power  of  issuing  its 
promissory  notes  to  circulate  as  money,  it  is  called  a  "bank 
of  issue." 

Generally,  the  bank  must  hold  itself  ready  at  any  time  to 
pay  the  amount  of  a  deposit  to  the  depositor  or  his  order,  but 
this  may  be  varied  by  agreement,  (as  to  give  one  or  more 
days'  notice,  or  not  to  draw  for  a  certain  time,  or  to  leave 
always  a  certain  sum  to  the  depositor's  credit,)  and  is  not 
an  essential  to  the  definition. 

But  it  is  essential  that  the  fund  should  be  used  in  prose- 
cuting some  of  the  functions  recognized  by  long  usage,  or  by 
explicit  statutory  enactment,  or  both,  as  belonging  to  the 
business  of  banking.  If  simply  used  to  make  investments 
of  other  kinds,  the  depositary  resembles  a  trustee  or  a  specu- 
lator rather  than  a  banker. 

The  definitions  of  the  words  Bank,  Banker,  and  Banking, 
in  Worcester's  Dictionary,  are  too  deficient  in  precision  to 
be  of  any  use  for  legal  purposes.  Those  given  by  Webster 
are   likewise  certainly  open   to   criticism ;   but   as   they  are 


§  2  PRELIMINARY. 

the  best  there  are,  we  give  the  pertinent  portions  of  them,  as 
follows :  — 

*' Ba7ik.  —  4.  By  analog]),  A  collection  or  stock  of  money,  de- 
posited by  a  number  of  persons,  for  a  particular  use ;  that  is,  an 
aggregate  of  particulars,  or  a  fund  ;  as  to  establish  a  bank,  that  is, 
a  joint  fund." 

"6.  A  company  of  persons  concerned  in  a  bank,  whether  a 
private  association  or  an  incorporated  company ;  the  stockholders 
of  a  bank  or  their  representatives,  the  directors  acting  in  their 
corporate  capacity." 

"  Banker.  One  who  keeps  a  bank ;  one  who  traffics  in  money, 
receives  and  remits  money,  negotiates  bills  of  exchange,  &c." 

"  Banking.  The  business  or  employment  of  a  banker ;  the 
business  of  establishing  a  common  fund  for  lending  money,  dis- 
counting notes,  issuing  bills,  receiving  deposits,  collecting  the 
money  on  notes  deposited,  negotiating  bills  of  exchange,  &c." 

Of  these  definitions,  the  second  is  both  the  least  satisfactory 
and  the  most  important.  For  the  question  will  often  arise, 
especially  in  reference  to  taxation,  whether  or  not  a  person 
or  firm  doing  business  on  his  or  her  own  account,  and  not  as 
a  corporation  or  association,  is  a  banker  or  a  banking  firm. 
Clearly  the  fact  of  trafficking  in  money  does  not  suffice  to 
convey  this  legal  character.  Otherwise  every  pawnbroker 
might  assume  the  dignified  title  of  banker. 

Bouvicr  says,  "  A  bank  is  an  institute,  generally  incorpo- 
rated, authorized  to  receive  deposits  of  money,  to  lend  money, 
and  to  issue  promissory  notes  (usually  known  as  bank  notes), 
or  to  perform  some  one  or  more  of  these  functions." 

This  is  clearly  faulty :  an  institution  may  have  power  to 
lend  money  and  not  be  a  bank  ;  e.  g.  a  partnership,  or  a  loan 
and  trust  company. 

In  Oulton  V.  Savings  Institution,^  Clifford,  J.  said  :  "  Banks 
in  the  commercial  sense  arc  of  three  kinds, —  of 

United  States  .         „    ,.  ,      ,     .        ,      .  r^   •    •      ^^ 

general  defi-    dcposit,  of  discount.,  and  of  Circulation.     Originally 

the  banking  business  consisted  in  receiving  deposits, 

such  as  bullion,  plate,  and  the  like,  for  safe  keeping,  until  the 

1  §  2.    Oulton  V.  Savings  Institution,  17  Wall.  109-1  IS. 


DEFINITION   OF   SAVINGS    BANK.  §  o 

depositor  should  see  fit  to  withdraw.  Later,  bankers  began 
to  loan  by  discounting  bills  and  notes,  or  on  mortgage,  pawn, 
or  other  security.  And,  at  a  still  later  period,  to  issue  notes 
of  their  own,  intended  to  circulate  as  money  instead  of  gold 
and  silver.  Modern  banks  frequently  exercise  any  two,  or 
even  three,  of  those  functions  ;  Init  it  is  still  true  that  an 
institution  prohibited  from  exercising  any  more  than  one  of 
them  is  a  bank  in  the  strictest  sense." 

Now  this,  as  to  the  second  function  considered  alone,  is  open 
to  the  same  objection  as  Bouvier's  defmition,  and  the  Judge's 
language  is  more  sweeping  than  the  case  called  for,  as  the 
question  before  him  was  whether  an  institution  having  the 
first  power  was  a  bank. 

§  3.  A  Savings  Bank  ^  is  an  institution  in  the  nature  of  a 
bank,  but  differing  as  follows  :  — 

First.  The  fund  formed  by  the  deposits  is  not  used  in 
discounting  and  loaning  on  personal  security,  &c.,  except  to 
a  limited  amount  to  the  depositors,  or  as  a  means  of  invest- 
ing surplus  moneys,  but  in  mortgages,  bonds,  and  stocks, 
designated  in  the  statute  ^  under  which  the  bank  is  organ- 
ized. 

Second,  and  chiefly.  The  deposits  must  be  invested  for  the 
benefit,  not  of  the  bank,  hut  of  the  depositors ;  this  is  the 
cardinal  distinction.  Money  deposited  in  a  bank,  unless 
agreed  to  the  contrary,  becomes  the  property  of  the  bank,  to 
be  used  for  its  profit,  and  if  lost  it  is  the  bank's  loss ;  but 
money  deposited  in  a  savings  bank  remains  the  property  of 

1  §  3.  See  Huntington  v.  Savings  Bank,  96  U.  S.  388,  "  A  savings 
bank  is  defined  to  be  an  institution  in  the  nature  of  a  bank,  formed  or 
established  for  the  purpose  of  receiving  deposits  of  money  for  the  benefit 
of  the  persons  depositing,  to  accumulate  the  produce  of  so  much  thereof  as 
shall  not  be  required,  by  tlie  depositors,  their  executors  or  administra- 
tors, at  compound  interest,  and  to  return  the  whole  or  any  part  of  such 
deposit,  and  the  produce  thereof,  to  the  depositors,  their  executors  or 
administrators,  —  deducting  out  of  such  produce  so  much  as  shall  be 
required  for  the  necessary  expenses  attending  the  management  of  such 
institution,  but  deriving  no  benefit  whatever  from  any  such  deposit  or 
the  produce  thereof."     Grant  on  Banking,  4th  ed.,  202. 

2  See  for  Massachusetts  law,  Pub.  Sts.  661,  662. 

9 


§  4  PRELIMINARY. 

the  depositor,  and  the  increase  is  his,  the  bank  having  no 
claim  except  for  the  expense  of  management,  and  if  lost  it  is 
the  depositor's  loss,^  unless  occasioned  by  the  negligence  of 
the  bank. 

Third.  A  bank  pays  out  deposits  on  checks,  while  the 
usual  method  with  savings  institutions  is  to  pay  only  to  the 
person  producing  the  pass-book. 

Whether  a  bank  is  actually  a  savings  bank  or  not  must  be 
determined,  not  by  its  name,  but  by  considering  if  its  charter  ^ 
gives  it  the  characteristics  above,  the  second  being  essential. 
A  savings  bank  is  simply  a  trustee  ;  all  moneys  received 
under  the  charter  are  trust  moneys,  and  the  depositors  stand 
in  the  same  relation  to  the  bank  as  the  stockholders  of  an 
ordinary  bank.  This  fact  is  of  cardinal  import  in  cases  of 
insolvency.^ 

§  4.  United  States  Definition  for  Purposes  of  Taxation.  R.  S. 
3407.  —  In  1866,  the  Congress  of  the  United  States  thus 
defined  a  bank  or  banker :  — ^ 

"Every  incorporated  or  other  bank,  and  every  person,  firm,  or 
company  having  a  place  of  business  where  credits  are  opened  by 
the  deposit,  or  collection  of  money  or  currency,  subject  to  be  paid 
or  remitted  upon  draft,  check,  or  order,  or  where  money  is  ad- 
vanced or  loaned  on  stocks,  bonds,  bullion,  bills  of  exchange,  or 
promissory  notes,  or  where  stocks,  bonds,^  bullion,  bills  of  ex- 
change, or  promissory  notes  are  received  for  discount  or  for  sale, 
shall  be  regarded  as  a  bank  or  banker." 

This  enactment  does  away  with  the  necessity  of  a  joint 
stock,  and  of  the  combination  of  funds  through  the  medium 
of  general  deposits.  It  would  in  most  cases  render  private 
money-lenders  bankers.  Its  intent,  however,  is  not  to  have 
this  force  generally,  but  only  for  the  specific  and  narrow 
purpose  of  taxation.     Every  money-making  occupation  is  to 

8  Osborne  v.  Byrne,  43  Conn.  155. 

4  That  any  one  whose  deposit  reaches  $100  may  at  his  option  have  it 
converted  into  stock,  does  not  prove  the  institution  a  savings  bank. 
State  V.  Lincoln  Savings  Bank,  14  Lea,  42. 

6  32  N.  J.  Eq.  163. 
10 


BANK   DEFINED   FOR   TAXATION.  §  4 

be  taxed  ;  a  few  broad  lines  are  drawn,  and  the  wbolc  com- 
munity is  marsballod  into  the  various  areas  by  means  of  tliis 
and  similar  imperative  definitions.  The  act  does  not  say  a 
private  money-lender  is  a  banker,  but  simply  that  he  shall  be 
taxed  as  such ;  probably  for  the  reason  that  his  business  is 
more  nearly  akin  to  banking  than  to  anything  else.  But  for 
])urposes  of  strict  legal  construction,  in  all  questions  arising 
beyond  the  control  of  the  provisions  of  this  act,  these  arbitrary 
boundary  lines  are  valueless.  A  private  money-lender  could 
not  have  been  taxed  as  a  banker  in  the  absence  of  this  express 
legislation ;  and  it  was  to  remedy  this  that  the  legislation  was 
deemed  necessary. 

In  construing  this  statute,  the  Supreme  Court  of  the  United 
States  ado})t  the  definition  of  a  banker  therein  given  (Act 
18G4,  §  79),  and  say  generally:  "Having  a  place  of  business 
where  deposits  are  received  and  paid  out  on  checks,  and  where 
money  is  loaned  upon  security,  is  the  substance  of  the  busi- 
ness of  a  banker."  ^  It  will  be  observed  that  the  statute  uses 
the  disjunctive  and  the  court  the  conjunctive  particle.  The 
statute  says :  "  Where  credits  are  opened  by  deposit  .  .  .  or 
where  money  is  advanced,"  <fec.  The  court  speak  of  the 
depositing  "  and'''  loaning.  For  all  general  purposes,  beyond 
the  artificial  influence  of  the  act,  the  court  is  clearly  the  more 
correct. 

R.  S.  3407  applies  to  a  Chicago  branch  of  a  Canada  bank,2 
but  not  to  a  corporation  whose  business  is  confined  to  invest- 
ment of  its  capital  in  bonds  secured  by  mortgage  on  real 
estate,  and  to  negotiation,  sale,  and  guaranty  of  them.^ 

1  §  4.  Warren  v.  Shook,  91  U.  S.  704. 

2  United  States  v.  Bank  of  Montreal,  21  Fed.  Rep.  236. 

8  The  company  did  not  receive  deposits  of  money  to  be  paid  or  remit- 
ted on  draft  or  check,  nor  make  discounts,  nor  issue  notes  (clause  1);  nor 
does  it  come  uiHlcr  clause  2,  for  the  loan  is  really  on  the  mortgage  of 
real  estate,  and  tlie  bond  is  only  evidence  of  the  debt;  nor  under  clause  3, 
for  not  those  who  keep  their  own  stocks  and  bonds  for  sale  are  bankers 
(if  so  nearly  all  companies  are),  but  those  receiving  bonds,  stock,  or  bills 
belonging  to  others,  for  discount  or  sale,  the  company  being  only  the  agent 
of  the  owner,  while  in  this  case  when  the  company  took  the  bonds  they 
became  its  property.     It  could  sell  or  not;  if  it  sold,  it  sold  its  own, 

11 


§  G  PRELIMINARY. 

§  5.  A  State  Bank  is  one  organized  under  State  law,  or  a 
charter  granted  l»y  a  State  legislature,  and  derives  its  power 
from  State  sovereignty. 

A  National  Bank  is  one  organized  under  the  national 
banking  laws,  and  derives  its  existence  and  powers  from  the 
Federal  sovereignty. 

Sources  of  the  Law  of  our  Subject. 

§  6.  The  Charter,^  or  act  of  incorporation,  or  the  general 
law  under  which  the  bank  is  organized,  so  far  as  valid,^  is 

and  not  another's,  as  a  bank  does.     Selden  v.  Equitable  Trust  Co.,  94 
U.  S.  419. 

^  §0.  This  word  is  often  used  as  equivalent  to  "  organic  law,"  though 
the  bank  may  be  organized  under  a  general  statute. 

The  articles  of  association  of  a  national  bank,  which  specify  tlie  objects 
of  the  association,  and  may  contain  any  provisions  for  the  conduct  of  its 
business  that  are  not  inconsistent  with  law,  when  signed  by  the  persons 
forming  the  company,  and  approved  by  the  comptroller,  are  in  the  nature 
of  a  charter. 

2  It  is  invalid  if  it  conflicts  with  the  United  States  Constitution  (as 
it  may  do  by  infringing  on  former  grants  to  others) ,  or  with  the  laws  of 
Congress  valid  under  it,  or  if  it  is  beyond  the  powers  of  the  granting 
sovereignly  under  the  State  constitution;  as  if  it  is  in  derogation  of  the 
essential  powers  of  future  legislatures,  as  those  of  police  regulation, 
eminent  domain,  and  perhaps  the  power  to  tax. 

The  right  of  a  State  to  take  the  property  of  a  citizen  when  necessary 
Eminem  do-  ^^^  public  use,  on  payment  of  its  value,  is  inherent  in  sover- 
main.  eignty,  and  no  legislature  can  take  it  out  of  the  people,  or 

give  it  away.     2  Parsons  on  Contracts,  521. 

So  with  police  regulation;  and  the  best  opinion  is,  that  the  power  of 
taxation  is  an  essential,  and  that  no  legislature  has  power  to 
lation  and  Surrender  or  limit  it  so  as  to  control  or  abridge  future  legis- 
taxation.  ]ation  under  it.  The  legislature  may  exercise  the  power  of 
taxing  or  not,  but  cannot  give  it  away.  Piscataqua  Bridge  v.  New 
Hamps-hire  Bridge,  7  N.  H.  09;  Debolt  v.  Ohio  Life  Ins.  &  Trust  Co., 
1  Ohio  St.  503. 

The  Federal  doctrine  is,  "  the  relinquishment  of  such  a  power  is  never 
to  be  assumed.  We  will  not  say  a  State  may  not  relinquish  it;  that  a 
consideration  sufficiently  valuable  to  induce  a  partial  release  of  it  may 
not  exist."     Providence  Bank  v.  Billings,  4  Peters,  501. 

And  in  State  of  New  Jersey  v.  Wilson,  7  Cranch,  104,  an  agreement 
that  the  lands  "shall  not  hereafter  be  subject  to  any  tax"  was  held 
12 


SOURCES   OF   BANKING   LAW.  §  7 

its  supreme  law,^  within  which  it  is  secure,  beyond  *  which 
it  cannot  go. 

§  7,  statute  Law,  SO  far  as  not  inconsistent  with  valid  ^ 
charter  rights,  controls  the  bank. 

State  Banks  are  absolutely  subject  to  all  applicable  laws 
of  Congress  valid  under  the  Constitution,  even  though  passed 
after  the  charter  was  granted ;  the  State  and  all  its  acts  are 
controlled  by  such  laws,  and  charter  rights  are  valid  only 
when  in  accord  with  them.  But  a  State  may  grant  charter 
rights  inconsistent  with  its  own  existing  statutes,  or  may 
pass  laws  subsecjucnt  to  the  charter  and  conflicting  with  it ; 
in  these  cases  subject  to  the  above  limitations,^  the  State  stat- 
utes must  give  way  to  the  charter. 

National  Banks  are  the  creatures  of  the  National  Banking 
Act,  which  may  be  amended,  altered,  or  repealed  at  any  time. 

valid ;  but  the  right  of  the  legislature  to  exempt  from  taxation  so  as  to 
bind  succeeding  legislatures  was  not  raised,  and  is  not  relevant  to  the  case, 
for  the  transaction  was  in  the  nature  of  a  treaty  with  the  Indians,  rather 
than  a  contract  between  a  State  and  its  citizens. 

'  Unless  there  is  an  express  reservation  of  the  right  in  the  charter, 
or  in  general  statute  existing  at  the  time  the  charter  is  granted,  (and 
therefore  applying  to  it  unless  the  charter  is  expressly  put  out  of  its 
control,)  the  legislature  cannot,  without  consent  of  the  bank,  repeal  or 
modify  the  rights  and  franchises  granted,  except  in  the  way  of  police 
regulation,  eminent  domain,  or  other  power  inherent  in  the  nature  of 
government,  which  are  really  not  exceptions,  but  the  boundary  lines  of 
the  rights  granted,  implied  reservations  iu  every  contract  made  by  the 
State ;  e.  g.  if  a  bank  has  charter  power  to  sell  and  transfer  negotiable 
paper,  a  law  taking  away  this  power  is  void,  as  impairing  the  obligation 
of  contracts.  Planters'  Bank  v.  Sharp,  6  How.  301;  Claghorn  v.  Cullen, 
13  Pa.  St.  133;  People  v.  Manhattan  Co.,  9  Wend.  351, 

But  Mechanics  and  Traders'  Bank  v.  Debolt,  1  Ohio  St.  591,  holds  that 
a  charter  is  not  a  contract,  but  a  law  subject  to  amendment  and  repeal, 
and  that  a  bank  is  a  public  institution,  appointed  solely  for  public  uses, 
and  subject  to  public  control  by  enlargement  or  limitation  of  its  pow- 
ers and  duties,  or  withdrawing  its  franchise  entirely.  Tliis,  of  course, 
will  not  weigh  against  the  decisions  of  the  United  States  Supreme  Court 
on  this  question  ari.sing  under  the  Constitution.     See  §  10. 

*  A  corporation  is  a  creature  of  the  law,  and  possesses  only  those 
properties  which  the  charter  of  its  creation  confers  upon  it.  Marshall, 
C.  J.,  in  Trustees  of  Dartmouth  College  r.  Woodward,  4  Wheat.  636. 

1  §  7.    See  §  6,  notes. 

13 


§  0  PRELIMINARY. 

They  are  under  the  entire  control  of  Congress,  and  their 
rights  cannot  be  determined  by  State  legislation,  except  where 
Congress  has  so  ordered,^  or  allowed.^ 

§  8.  The  Common  Law  sui)])lies  the  law  we  seek,  where  not 
superseded  by  charter  or  statute.  Especially  do  the  princi- 
ples relating  to  Usage,  Conflict  of  Laws,  Principal  and  Agent, 
and  Contracts  in  general,  concern  us.^ 

§  9.    A   Usage  ^   that   is   applicable ,2   known  ^  actually  or 

2  See  as  to  interest,  Part  II.  §  30. 

8  E.  g.  Congress  could  prohibit  the  States  from  taxing  national 
banks,  but  if  it  does  not  exert  this  power  they  are  not  exempt.  See 
Part  II.  §  41.  If  a  State  could  bind  national  banks  further  than  above, 
it  could  legislate  them  out  of  existence,  as  by  a  discriminating  tax, 
making  State  law  supreme,  instead  of  Federal  law,  as  the  Constitution 
provides. 

1  §  8.  The  principles  of  Contract  and  Agency  are  so  woven  into  the 
very  tissue  of  banking  law  that  to  state  them  as  preliminary  would  be 
almost  to  make  banking  law  preliminary  to  itself,  but  Usage  and  Conflict 
can  with  great  advantage  to  clearness  be  dwelt  upon  slightly  before  pass- 
ing to  the  main  subject. 

1  §  9.  (a)  The  Louisiana  Code  defines  customs  as  follows:  "  Customs  re- 
sult from  a  long  series  of  actions  constantly  repeated,  which  have  by  such 
repetition,  and  by  uninterrupted  acquiescence,  acquired  the  force  of  a 
tacit  and  common  consent."     Art.  3,  oh.  1. 

(b)  The  proof  of  a  usage  must  be  by  instances,  not  opinion,  and  gen- 
erally one  witness  is  not  enough ;  several  should  testify  to  what 
^^'^^'         is,  by  their  observation,  the  uniform  manner  among  themselves 
and  others. 

Usage  proved  by  Parol  Testimony— The  custom  or  usage  of  banks 
generally,  or  of  an  individual  bank,  may  be  sufficiently  proved  by  parol 
testimony.  (Renner  v.  Bank  of  Columbia,  9  Wheat.  587 ;  Mills  v.  Bank 
of  United  States,  11  id.  431.  Indeed,  in  a  large  proportion  of  the  cases 
cited  in  this  chapter,  parol  evidence  has  been  admitted  without  objection.) 
It  is  not  necessary  that  the  witnesses  who  are  relied  upon  should  be  ex- 
perts in  the  banking  business,  or  in  any  manner  engaged  in  the  same,  or 
connected  with  any  bank  whose  individual  usage  is  to  be  shown.  If  they 
liave  had  any  dealings  which  have  brought  the  custom  or  usage  within 
their  observation  and  cognizance,  so  that  they  actually  know  it  as  a  mat- 
ter of  fact,  they  are  competent  to  testify  to  it,  and  it  may  be  established 
by  their  testimony  alone.     Griffin  v.  Ilice,  1  Hilt.  184. 

It  is  a  question  for  the  jury  how  uniform,  how  long,  where,  when,  be- 
tween whom,  and  if  actually  known. 

For  the  court,  whether  given  facts  established  a  custom,  and  whether 

14 


USAGE.  §  9 

constructively,  certain,^  uniform,^  established,^  continuous,^ 
peaceable,''   reasonable,^   not   contrary  to  enacted   law,'-^   nor 

it  is  reasonable  and  not  contrary  to  law,  or  to  expressed  intent  of  parties, 
see  note  5. 

(c)  Usage  having  been  once  found  and  sanctioned  by  the  courts,  evi- 
dence to  disprove  its  existence  becomes  thereafter  inadmissible.    But  this 
refers  only  to  its  existence  at  that  time  at  which  the  decision    change  of 
found  the  fact  of  its  existence.     For  a  usage  is  sustained  by   properfif  not 
the  court,  not  because  it  is  in  itself  law,  but  generally  in  spite  arbitrary. 
of  the  fact  that  in  itself  it  is  not  law,  and  because  it  is  the  uniform  prac- 
tice of  the  community  which  the  judiciary  from  motives  of  policy  will 
refrain  from  interfering  with.     But  if  at  any  time  it  ceases  to   changing  a 
become  the  practice  of  the  community,  it  will  no  longer  be   "tfn'g^^'„"^' 
judicially  recognized  as  binding.     For  all  transactions  occur-   one,  and  is 
ring  during  the  period  tliat  it  remained  unchanged  it  must    tiiesame 
always  be  law,  but  transactions  occurring  after  the  change   ^^^^' 
will  not  be  affected  by  it.     Evidence  of  the  fact  of  a  change  is  therefore 
admissible  to  show  that  the  previous  decisions  have  ceased  to  be  control- 
ling precedents,  and  to  indicate  the  true  rule.     Cookendorfer  v.  Preston, 

4  How.  (U.  S.)  317. 

Arbitrary  Alteration  by  a  Bank  op  its  Usages  or  Rules.  —  A 
bank  cannot,  by  an  arbitrary  change  in  any  of  its  rules  or  usages,  injuriously 
affect  the  rights  or  interests  of  any  dealer  with  it,  who  has   ,j,j^^  j^^  ^^_ 
previously  had  knowledge  of  such  rules  and  usages,  without   ^ors  fore- 

•   •  •  J?     1  I  T'    i-i     s'Sht,  and 

bringing  home  to  him  positive  notice  of  the  change.     L  ntil  one  who  acta 

he  has  been  sufficiently  notified  to  the  contrary,  he  has  the  of  uniform-^ 

right  to  expect  the  ordinary  course  of  dealing  to  be  continued,  '"^^gj"  ^5;*^® 

Barnes  v.  Ontario  Bank,  19  N.  Y.  152;  Gumming  v.  Shand,  ouiy  founda- 

5  Hurl.  &  N.  95;  29  L.  J.  Exch.  129.  But  to  enable  the  cus-  sight), shall' 
tomer  to  take  advantage  of  this  doctrine,  he  must  show  that  (""ceaVy'^a'^" 
the  alteration  has  taken  place  in  an  actual  rule  or  bona  fide  sudden 

^  ^  change  of 

usage,  in  the  legal  sense  of  the  latter  phrase,  of  the  bank,  usage  of 

The  usage  need  not  be  a  general  usage  of  the  bank ;  it  may  be  no  notice, 

one  which  is  only  good  as  between  himself   and   the  bank,  "nlform'^acts 

For  usaofes  of  this  limited  nature  may  exist,  and  a  bank,  by  "^^^^  merely 

"  ...  courtesies. 

its  course  of  dealing   with   a  single   customer,    may   assume    a  hundred 
special  obligations   towards  him    individually  which  do  not   no  right  to 
bind  it    as    towards    anybody   else.     Hotchkiss   v.    Artisans'   ''"°"^*''^- 
Bank,  42  Barb.  517. 

In  the  cited  case  of  Gumming  v.  Shand,  the  bankers  had  taken  up 
certain  bills  for  a  customer  upon  the  security  of  the  proceeds  to  be 
expected  from  certain  consignments;  at  the  same  time,  they  had  been 
accustomed  to  let  him  continue  his  drafts  upon  his  deposit  account,  or 
account  current,  with  them.     It  appearing  that  this  was  the  established 

15 


§  9  TRELIMINARY. 

wcll-scttlcd  principles  of  morality,  justice,  and  policy,  nor  to 
the   clearly    expressed   or   implied    intent  ^'^  of    the    parties, 

course  of  dealing  between  them  and  this  customer,  it  was  held  tliat  they 
could  not  suddenly,  without  express  notice  to  him,  interfere  with  this 
course,  charge  him  with  the  amount  of  advances  before  the  proceeds 
from  the  consignments  could  be  realized,  and  so  cause  his  account  to 
appear  overdrawn. 

But  it  must  be  supposed  that  there  is  a  difference  between  an  estab- 
lished course  of  dealing  of  such  a  character  that  the  customer  is  entitled  to 
demand  its  continuance  until  due  notice  has  been  given  him  of  an  intention 
to  discontinue,  and  a  mere  gratuitous  habit  on  the  part  of  the  bank  to  al- 
low privileges  or  favors  of  such  a  character  tiiat  the  customer  ought  to  be 
aware  that  they  are  concessions  purely  voluntary,  and  revocable  at  any 
time,  at  the  bank's  convenience  and  option.  In  other  words,  there  is 
a  distinction  between  a  usage  involving  an  implied  agreement,  and  a 
habit  of  frequently  extending  a  courtesy  or  favor  altogether  without 
consideration. 

It  is  of  course  impossible  to  draw  an  accurate  line  of  demarcation  be- 
tween the  usages  of  the  former  class  and  the  habits  which  fall  within  the 
latter  description.  In  each  instance  the  appropriate  character  will  be  con- 
ferred by  a  combination  of  all  the  many  minute  circumstances  which  can 
be  adduced  to  inteipret  the  true  nature  of  the  transactions. 

2  Pertaining  to  the  business,  relating  to  the  transaction.  A  usage  of 
weavers  is  not  applicable  to  banking,  nor  does  a  usage  in  banking  to 
do  an  act  for  one  purpose  apply  to  sustain  doing  the  act  for  a  different 
purpose.  To  the  nicety  of  organization  of  which  banking  admits  is  due 
the  great  strictness  and  accuracy  with  which  banking  customs  must  be 
proved,  and  will  be  construed.  So  far  from  its  being  permissible  to 
make  the  slightest  approach  to  a  generalization  or  to  an  argument  from 
the  closest  of  analogies,  the  tendency  of  the  courts  has  been  to  trim  the 
usage  to  its  very  narrowest  proportions,  and  to  require  the  most  perfect 
adaptation  of  the  facts  of  the  case  to  these.  That  two  acts  are  essen- 
tially dependent  for  their  lawful  exercise  upon  power  of  precisely  the  same 
description,  that  one  is  a  natural  corollary  of  the  other,  that  one  is  con- 
veniently exercised  in  conjunction  with  the  other,  will  not  suffice  to  au- 
thorize the  doing  of  the  second  when  the  right  to  do  the  first  is  dependent 
upon  a  custom.  Even  power  to  do  a  certain  act  arising  from  a  custom  to 
do  it  for  a  particular  purpose  or  under  particular  circumstances,  does  not 
imply  or  include  power  to  do  the  same  act  for  a  very  slightly  different 
purpose  or  under  very  slightly  different  circumstances.  Supporting  an 
act  upon  proof  of  a  banking  usage  is  a  matter  of  very  delicate  and  minute 
accuracy.     IMus.sey  v.  Eagle  Bank,  8  Met.  3U6. 

2  No  one  can  take  advantage  of  a  usage  of  which  he  was  ignorant  at 
the  time  of  contract,  for  he  did  not  contract  in  reference  to  it.     Fowler  v. 

16 


USAGE.  §  9 

nor  extrinsic,^^  (i.  e.  so  aside  that  one  of  ordinary  prudence 
and  foresight  would  not  contemplate  it  as  a  factor  in  the 

Pickering,  119  Mass.  33;  Nonotuck  Silk  Co.  v.  Fair,  112  Mass. 
354.     But  this  of  course  cannot  apply  to  usage  that  has  be-   ofoneigno- 
come  fixed  as  a  part  of  the  common  law,  and  it  may  be  doubted   '^'^"'' 
if  it  can  apply  without  limitation  to  other  usages;  for  if  D.  employs  a 
banker  or  physician,  and  injury  results  by  reason  of  neglect  of  custom- 
ary precautions,  D.  could  surely  take  advantage  of  the  usage  indirectly  as 
bearing  on  the  question  of  negligence. 

One  who  actually  knows  of  a  particular  bank's  usages,  and  is  reason- 
ably aware  that  the  bank  will  be  a  factor  in  the  transaction,  is  bound  by 
them ;  but  one  who  is  in  fact  ignorant  will  not  be  bound  by  Against  one 
a  usage  peculiar  to  the  bank,  unless  he  employs  the  bank  to  ignorant. 
act  for  him,  though,  as  to  a  usage  general  to  the  banks  of  a  given  city, 
every  one  who  enters  into  a  transaction  which  involves  a  dealing  with  or 
through  the  banks  of  that  place  is  held  to  have  notice;  if  he  is  in  fact 
ignorant  of  it,  and  loses  thereby,  it  is  his  own  loss,  and  he  can  hold  the 
bank  to  the  same,  and  will  not  be  affected  disadvantageously  by  a  differ- 
ent special  custom  of  a  particular  bank,  unless  he  employs  that  bank  or 
actually  knows  its  habit.  Of  course  no  one  can  allege  ignorance  of  usage 
that  has  become  law. 

The  law  presumes  knowledge  of  ancient,  general,  widely  known  usage. 
Loud  ».  Hall,  106  Mass.  404;  Ober  v.  Carson,  62  Mo.  209.  A  person 
entering  into  a  contract  is  not  bound  by  the  usage  of  a  particular  busi- 
ness, unless  he  actually  knew  of  it,  or  it  is  so  general  as  to  furnish  a  pre- 
sumption of  knowledge.     Stevens  v.  Reeves,  9  Pick.  198. 

A  usage  of  the  factories  of  a  neighborhood,  that  all  employed  shall  be 
held  to  work  a  fortnight  after  they  give  notice  of  intent  to  quit,  does  not 
bind  one  who  did  not  know  of  the  custom.  "  The  usage  is  a  particular 
one,  and  not  a  general  custom,  and  it  should  have  appeared  that  the  de- 
fendant knew  of  the  usage  when  he  entered  on  the  work,  or  before  he  left 
it.  It  is  so  with  the  usage  of  banks,  and  all  other  usages  not  of  so  general 
a  nature  as  to  furnish  a  presumption  of  knowledge."  Parker,  C.  J.,  in 
Stevens  v.  Reeves,  9  Pick.  198. 

4  Not  vague  and  indefinite.  Oelricks  v.  Ford,  23  How.  49;  Bassett 
V.  Lederer,  1  Hun,  274.  A  usage  to  return  goods  sent  for  inspection, 
some  saying  within  three  days,  others  within  a  week  or  a  month,  is 
not  certain  and  uniform  enough  to  be  binding.  Wood  v.  Wood,  1  Car. 
&  P.  59. 

5  Not  fluctuating  and  occasional.  Cope  v.  Dodd,  13  Pa.  St.  33;  United 
States  V.  Buchanan,  8  How.  83,  102. 

What  lapse  of  time,  or  how  many  instances  actually  occurring,  are  re- 
quisite to  establish  a  custom,  is  one  of  those  questions  attended  with  such 
an  intrinsic  and  essential  indefiniteness  as  prevents  the  possibility  of  any 
VOL.  t.  2  17 


§  9  PRELIMINARY. 

transaction,)  binds  ^^   the   parties,  on   the   theory  that  they 
contracted  in  reference  to  it. 

accurate  answer.  Certainly  a  usage  must  have  a  beginning.  But,  in 
its  early  stages,  it  is  no  more  a  complete  usage  in  the  eye  of  the  law, 
hiiving  the  legal  attributes  thereof,  than  a  boy  in  his  nonage  is  a  man, 
having  the  legal  rights  of  a  man.  Twenty-one  years  is  the  arbitrary 
limit  which  distinguishes  the  le^al  infant  from  the  legal  man.  But  no 
number,  either  of  years  or  of  recurrent  acts  and  instances,  can  be  arbi- 
trarily set  to  mark  accurately  the  transition  period  when  the  usage  ceases 
to  be  embryonic  and  becomes  perfect.  The  understanding,  arrangement, 
or  directions  of  bank  officers,  that  a  certain  method  shall  thereafter  be  ob- 
served as  the  usage  of  the  bank  for  the  transaction  of  a  certain  class  of 
acts,  does  not  render  this  method  a  legal  usage  of  the  bank  as  towards 
any  outside  party,  until  time  and  practice  shall  suffice  to  give  it  that  char- 
acter which  it  does  not  and  cannot  derive  from  the  intention  of  the 
officials.  But  time  and  practice  bring  in  their  train  acquiescence  and 
notoriety,  and  from  these  the  law  will  draw  the  inference  of  knowledge  on 
the  part  of  the  public,  if  the  usage  is  that  of  the  banks  generally;  or  on  the 
part  of  the  parties  dealing  with  the  bank,  if  the  usage  is  that  of  an  individ- 
ual bank  only.  Especially,  if  the  custom  is  in  derogation  of  the  common 
law,  a  short  time  and  a  few  instances  of  practice  under  it  will  be  insuffi- 
cient to  obtain  its  recognition.  Duvall  v.  Farmers'  Bank,  9  Gill  &  J.  31; 
Adams  ».  Otterback,  12  How.  U.  S.  539.  But  a  single  instance  of  prac- 
tice under  a  usage,  though  it  would  be  utterly  worthless  to  establish  the 
fact  of  the  custom,  is  yet  amply  sufficient  to  bring  home  notice  of  the  ex- 
istence of  an  already  established  custom  to  the  persons  dealing  with  the 
bank  and  having  knowledge  of  such  single  instance.  Dorchester  &  Mil- 
ton Bank  v.  New  England  Bank,  1  Cush.  177. 

^  See  note  5. 

'  A  custom  must  be  generally  acquiesced  in  (not  disputed  at  law  or 
otherwise)  by  persons  acting  within  the  scope  of  its  operations. 
Peaceable.  -VYijere  it  is  the  subject  of  contention,  and  only  submitted  to 
tinder  protest,  and  to  avoid  litigation,  it  does  not  have  that  basis  of 
common  consent  upon  which  the  authority  of  usage  is  built.  Archer  v. 
Bokenham,  11  Mod.  161;  Strong  r.  Grand  Trunk  R.  Co.,  15  Mich.  205; 
McMasters  v.  Pennsylvania  R.  Co.,  09  Pa.  St.  374;  Dixon  v.  Dunham, 
14  111.  324.  But  though  a  usage  must  be  generally  assented  to,  as  well 
as  asserted,  it  need  not  receive  universal  consent.  Desha  v.  Holland,  12 
Ala.  513.  There  must  be  opposition  before  or  at  the  time  of  the  transac- 
tion, and  not  merely  the  subsequent  denial  of  the  defendant,  to  break 
the  current  of  acquiescence. 

8  A  custom  must  be  reasonable,  which  is  not  the  case  if  it  is  such  as 
honest  and  right-minded  men  would  deem  unfair  and  unrighteous;  as  to 
put  all  the  good  berries  on  top,  and  bad  at  the  bottom,  or  to  charge  the 

18 


USAGE.  §  9 

It  is  sometimes  said  a  usage  must  be  general.  See  note  18  c. 
Change  of  usage.     See  note  1  h. 

original  cost  of  articles  used  at  a  funeral,  though  the  same  may  be  used  at 
other  funerals.  Paxton  v.  Courtnay,  2  Fost.  &  Fin.  131.  General  usage 
is  strong  proof  of  reasonableness.  Prudent  men  would  not  otherwise  con- 
tinue it,  or  allow  others  to,  without  protest.  A  custom  qf  banks  to  honor 
occasional  overdrafts  of  customers  whose  standing  is  good  is  unreasonable. 
Lancaster  Bank  v.  Woodward,  18  Pa.  St.  357.  And  so  a  usage  not  to 
rectify  mistakes  imless  discovered  before  leaving  the  room.  Gallatin  o. 
Bradford,  1  Bibb,  209.  It  is  not  a  reasonable  usage  to  send  a  draft 
(which  the  bank  has  for  collection)  to  the  drawee,  to  collect  for  himself. 
Chapman,  C.  J.,  Whitnej'^  v.  Esson,  99  Mass.  311. 

^  A  usage  must  not  be  contrary  to  enacted  law,  morality,  religion,  or 
settled  principles  of  justice  and  public  policy;  but  portions  of  the  com- 
mon law  that  are  not  founded  on  justice  and  policy  directly,  but  are  formal, 
and  originated  in  usage  and  convenience,  may  be  changed  by  usage. 

No  custom  can  influence  the  construction  of  a  contract,  or  vary  the 
rights  of  parties,  if  the  custom  is  illegal,  as  if  it  is  contrary  to  religion, 
morality,  or  public  policy;  Barnard  r.  Kellogg,  10  Wall.  383,  390;  Cal- 
lender  v.  Dinsmore,  5-5  N.  Y.  200-208  ;  or  if  it  is  opposed  to  a  well-settled 
rule  of  law ;  Green  r.  Tyler,  39  Pa.  St.  361 ;  as  if  the  words  have  received 
a  judicial  interpretation,  it  is  not  competent  to  show  a  contrary  meaning 
by  usage.  So  a  usage  for  a  factor  to  pledge  generally  his  principal's  goods 
is  bad,  as  opposed  to  settled  law.  Newbold  v.  Wright,  4  Rawle,  195.  So 
a  usage  to  take  usurious  interest  is  bad.  Green  v.  Tyler,  39  Pa.  St.  361. 
So  where  a  bank  posted  a  notice  that  all  indorsers  of  notes  to  it  would  be 
required  to  waive  demand  and  notice,  and  D.,  for  several  years  a  customer 
of  the  bank,  indorsed  to  it  without  any  waiver  written  on  the  note,  it 
was  held  that  parol  evidence  of  the  usage  of  the  bank  and  assent  of  the 
indorser  could  not  be  received  to  change  the  settled  rule  of  law  on  the 
indorsement.     Piscataqua  Exchange  Bank  v.  Carter,  20  N.  H.  246. 

Usage  cannot  be  shown  to  absolve  a  bank  from  a  positive  and  essential 
duty.  The  omission  of  any  material  portion  of  a  transaction  which  it  un- 
dertakes to  perform  cani.ot  be  excused  on  the  ground  of  a  custom  to  omit 
such  portion.  What  the  bank  undertakes  to  do,  it  must  do;  it  is  only 
the  manner  of  the  doing,  not  the  doing  itself,  that  can  be  the  proper  sub- 
ject of  a  custom.     Borup  v.  Nininger,  5  Minn.  523. 

No  act  which  practically  amounts  to  a  wrongful  appropriation  or  an 
improper  use  of  the  corporate  funds  can  be  sanctioned  by  a  usage.  Thus, 
a  usage  to  honor  the  occasional  overdrafts  of  customers,  whose  general 
standing  and  repute  is  good,  is  bad  at  law.  Proof  of  such  a  usage  will 
not  protect  the  corporation,  or  any  of  its  officers  concerned  in  the  trans- 
action, from  the  natural  and  ordinary  results  of  its  wrongfulness.  Lan- 
caster Bank  r.  Woodward,  18  Pa.  St.  357. 

19 


§  9  PRELIMINARY. 

(a)  The  greatest  care  must  be  taken  in  each  case  to  ex- 
amine the  usage  in  reference  to  each  of  the  requisites,  and  in 

Laws  reg'ulating  legal  tender  cannot  be  affected  by  any  local  usages  to 
disregard  them  prevailing  among  banking  houses.  Marine  Bank  Cases, 
27  111.  525;  28  id.  90,  463;  29  id.  248. 

It  is  a  matter  of  ordinary  occurrence  for  persons  using  printed  blanks 
for  checks  to  cancel  some  portion  of  the  pi-inted  matter  which  does  not 
suit  their  temporarj' convenience;  and  banks  are  wont  to  disregard  the 
fact  of  such  cancellation  as  matter  of  suspicion,  and  to  assume  that  it  was 
done  by  the  proper  and  authorized  person.  But  the  banks  do  this  at  their 
peril,  and  are  not  to  be  saved  from  a  consequent  loss  simply  because  they 
can  show  a  custom  on  their  part  to  regard  erasures  of  printed  matter  as 
no  evidence  of  unauthorized  alteration,  when  the  same  erasure  of  written 
matter  would  be  so.  Such  a  custom,  said  the  court  in  Connecticut,  has 
not  existed  so  long,  or  become  so  general,  as  to  be  a  part  of  the  law  mer- 
chant, and  no  person  will  be  affected  by  it  unless  he  be  positively  shown 
to  have  had  knowledge  of  such  a  usage  on  the  part  of  the  bank  and  to 
have  acquiesced  in  it.  Mahaiwe  Bank  v.  Douglass,  31  Conn.  170.  The 
habit  is  certainly  somewhat  older  now  than  it  was  when  that  decision  was 
rendered  ;  but  mere  age  will  hardly  give  it  authority  in  the  courts.  It  is 
a  usage  containing  intrinsic  objections,  which  may  very  pi'obably  prevent 
it  from  ever  receiving  recognition  except  upon  proof  of  direct  assent  to  it 
by  the  parties  concerned. 

It  is  a  general  principle,  that  no  custom  among  banks,  however  uni- 
versal, or  long  established,  or  uniform  it  may  appear  to  be,  can  give  va- 
lidity to  any  transaction  upon  their  part  which  conflicts  with 

Usage  con-  ^  ~  i  x  ,         ,  . 

trary  to  a  positive  Statutory  enactment.     But  though  the  doctrme  in 

this  shape  is  clearly  sound,  it  has  been  thus  far  illustrated 
only  by  cases  arising  under  the  usury  laws.  Banks  have  often  sought  to 
evade  the  restrictions  of  these  laws  under  cover  of  a  customary  course  of 
dealing.  But  all  such  efforts  at  evasion  have  thus  far  been  rigorously  de- 
feated by  the  courts.  Niagara  County  Bank  v.  Baker,  15  Ohio  St.  68; 
Protection  Ins.  Co.  v.  Harmer,  2  id.  452;  New  York  Firemen's  Ins.  Co. 
V.  Ely,  2  Cow.  707 ;  Dunham  v.  Gould,  16  Johns.  367,  per  Chancellor 
Kent.  An  aiiparent  exception  to  this  statement  might  be  supposed  to  be 
found  in  the  custom  of  banks,  when  discounting,  to  deduct  the  interest 
in  advance,  thereby  securing  to  themselves  ititerest  upon  this  interest  for 
the  period  for  which  the  discounted  paper  runs,  and  so  actually  receiving 
a  fraction  of  one  per  cent  more  than  the  regular  rate.  But  this  should  be 
regarded  rather  as  an  express  power  conferred  by  charter  or  organic  law, 
than  as  an  exception  based  solely  upon  usage.  Power  "to  discount"  is 
usually  in  terms  given  in  all  such  charters  and  laws.  If  not  given,  it 
must  be  regarded  as  one  of  the  essential  elements  of  the  banking  business, 
which  must  be  enjoyed  by  every  banking  institution  by  virtue  of  its  gen- 
20 


USAGE.  §  9 

the  light  of  decided  cases  in  the  State  to  whose  law  the  matter 
is  subject ;  for  the  courts  do  not  agree,^^  the  cases  are  not 

eral  character  and  the  objects  for  which  it  exists.  Now  "  discounting" 
means  a  loan  of  money  upon  business  paper  where  the  interest  is  thus 
"counted  off"  or  deducted  beforehand;  the  deduction  in  this  shape  is  a 
part  of  the  definition  of  the  word,  an  essential  element  in  the  transaction 
itself.  Fleckner  v.  Bank  of  the  United  States,  8  Wheat.  338;  Niagara 
County  Bank  v.  Baker,  15  Ohio  St.  69;  Farmers  &  Mechanics'  Bank  v. 
Baldwin,  23  Minn.  198.  A  corporation  therefore  entitled  to  conduct  the 
general  business  of  banking,  a  fortiori  a  corporation  especially  empowered 
"to  discount,"  has  legislative  authority  to  compute  interest  in  this  pe- 
culiar manner.  The  habit  of  doing  so  must  unquestionably,  in  its  origin 
in  time  past,  have  been  recognized  as  a  usage.  But  since  then  it  has 
come  to  be  an  inherent  part  of  the  transaction  of  discounting,  and  when- 
ever discounting  is  done  under  legislative  permission,  this  computation 
may  be  made  by  virtue  of  the  same  permission  and  as  part  thereof.  The 
exception  to  the  usury  laws  is  not,  therefore,  based  on  the  solitary  fact  of 
a  usage,  but  of  a  usage  incorporated  into  and  sanctioned  by  legislative 
enactment,  and  it  is  the  latter,  not  the  former,  ground  that  must  be  relied 
upon  as  really  authorizing  the  taking  of  usurious  interest.  McLean  v. 
Lafayette  Bank,  3  McLean,  587. 

Customs  must  be  moral;  a  usage  of  "  bundling,"  i.  e.  for  those  courting 
to  sleep  together,  will  not  excuse  connivance  of  a  father  in  an   usage  con- 
action  by  him  for  his  daughter's  seduction.     Seagar  v.  Sliger-   ^^*ty_ 
land,  2  Caines,  219. 

Usages  against  legal  rules  rejected :  — 

1.  The  rule  that  negotiable  paper  not  payable  on  demand  is  entitled  to 
grace,  otherwise  not;  a  usage  in  opposition  to  this  would  over-   usage  con- 
turn  the  whole  law  as  to  bills  of  exchange.     Woodruff  v.  Mer-  justke!" 
chants'  Bank,  25  Wend.  673. 

2.  The  rule  that  bank  must  pay  depositor  an  equal  sum  in  good 
money.     Willetts  v.  Paine,  43  Bl,  433. 

3.  The  rule  that,  where  the  holder  of  a  bank  bill  has  cut  it  in  two  to 
send  by  mail,  if  one  part  is  lost,  he  can  recover  the  full  value  by  presenting 
one  half  and  showing  loss  of  the  other;  contrary  custom  rejected.  Bank 
of  the  U.  S.  V.  Sill,  5  Conn.  106. 

4.  The  rule  that  the  purchaser  of  overdue  negotiable  paper  takes  it 
subject  to  the  equities  against  the  party  he  takes  it  from.  Vermilye  v. 
Adams  Express  Co.,  21  W^all.  139. 

5.  The  rule  that  money  paid  under  mistake  of  fact  can  be  recovered. 
A  bank  cannot  arbitrarily  make  by-laws  or  institute  usages  which  shall 

injuriously  affect  the  rights  of  third  parties.  If  any  person  deliberately 
assents  to  such  by-laws  or  usages,  it  becomes  a  different  matter,  and  there- 
after, as  a  mutual  understanding  or  agreement,  the  bank  might  doubtless 

21 


§  9  PREUMINARY. 

reducible  to  harmony.  This  is  where  the  law  is  growing,  and 
the  crystals  arc  nearer  coini)letion  in  those  States  whose  social 
life  is  most  saturated  with  commerce. 

enforce  it  as  towards  this  individual.  But  such  assent,  implying  the 
waiver  of  valuable  rights,  will  never  be  presumed  simply  because  the  bank 
has  insisted  upon  hiving  down  the  rule  for  its  own  conduct.  Thus,  a  by-law 
or  usage  requiring  all  errors  in  payments  over  the  counter,  or  in  receipts 
or  entries  in  a  depositor's  bank-book,  to  be  corrected  by  the  party  before 
leaving  the  banking-rooms,  are  absolutely  devoid  of  any  effect  whatsoever. 
That  as  a  matter  of  fact  the  party  did  count  his  money,  or  did  examine 
the  writing  or  entry  before  he  left  the  rooms,  and  that  he  then  made  no 
objection  to  the  accuracy  of  the  transaction,  might  be  admissible  in  evi- 
dence to  sustain,  so  far  as  it  could,  the  presumption  of  correctness.  But 
it  would  be  strictly  as  circumstantial  evidence;  and  the  further  and 
independent  fact  that  it  was  the  law  or  usage  of  the  bank  to  refuse  to 
make  any  adjustment  unless  this  process  was  observed  would  have  noth- 
ing whatsoever  to  do  with  the  matter,  and  would  doubtless  not  be  ad- 
mitted in  evidence,  by  reason  of  its  entire  impertinence.  Neither  can 
this  power,  which  the  directors  could  not  claim  at  common  law,  be 
asserted  by  virtue  of  the  authority  given  them  by  legislative  enactment 
to  regulate  the  conduct  of  the  business  and  affairs  of  the  bank.  Such 
authority  does  not  empower  them  to  make  rules  which  shall  wrongfully 
affect  tlie  rights  of  outside  dealers  with  the  corporation.  Farmers  & 
Mechanics'  Bank  v.  Smith,  19  Johns.  115;  Gallatin  v.  Bradford,  1  Bibb, 
209. 

Banking  and  other  usages  altering  legal  rules  have  been  admitted :  — 

1.  The  general  rules  of  law  as  to  the  time  and  place  and  mode  of  mak- 
ing demand  and  giving  notice  of  bills  and  notes,  as  notice  by  mail  where 
Usages  held  a  party  lives  in  same  town;  Chicopee  Bank  v.  Eager,  9  Mete, 
literlug°ru!e^s  ^84;  Griunau  v.  Walker,  9  Iowa,  426;  or  notice  on  a  day  ear- 
of  formal  law.  ij^.  or  later  than  the  legal  day;  Pierce  i'.  Butler,  14  Mass. 
303;  or  demand  on  fourth  day  of  grace;  Bank  of  Washington  v.  Triplet, 
1  Pet.  25 ;  or  on  a  day  previous  to  what  is  not  a  legal,  but  only  a  custom- 
ary holiday.     City  Bank  v.  Cutter,  3  Pick.  414. 

2.  The  rule  that  a  bank  receiving  a  check  for  collection  has  till  the 
close  of  banking  hours  on  the  next  business  day  in  which  to  present 
it.  Rickford  v.  Ridge,  2  Camp.  537;  Mohawk  Bank  v.  Broderick,  13 
Wend.  133. 

3.  The  rule  that  a  bank  to  whom  a  note  is  sent  for  collection  need  not 
notify  all  the  indorsers.     Smedes  v.  Bank  of  Utica,  20  Johns.  372. 

4.  Commencement  day  at  Harvard  College  (situated  three  miles  from 
Boston)  is  not  a  legal  holiday,  upon  which  by  statute  the  Boston  banks 
would  be  authorized  to  close.  But  it  has  long  been  their  usage  to  do  no 
business  upon  that  day,  and  to  make  demand  and  give  notice,  &c.  upon 

22 


USAGE.  §  9 

(5)  The  question  always  to  be  answered  is,  "What  is  it  fair 
to  presume  the  parties  intended  ?    The  business  must  be  done 

commercial  paper  upon  the  day  preceding,  in  like  manner  as  in  case  of 
Sundays  and  tlie  like.  The  courts  of  Massachusetts  have  recognized  the 
custom  as  good.     City  Bank  v.  Cutter,  8  I'ick.  414. 

5.  A  countrj'  bank  in  the  State  of  New  York  was  wont  to  send  paper 
left  with  it  for  collection  in  New  York  City  by  the  captain  of  a  steamboat 
plying  to  the  city,  instead  of  sending  by  mail.  It  was  also  wont  to  send 
only  once  a  week,  except  in  cases  of  an  unusual  accumulation  of  paper. 
The  steamer  arrived  in  the  city  early  in  the  evening  of  the  same  day 
on  which  it  started.  The  court  held  that  the  custom  was  not  inopera- 
tive as  being  unreasonable,  or  as  wanting  any  of  the  requisites  of  a 
good  custom ;  and  that,  at  least  as  towards  all  persons  affected  with 
knowledge  of  it,  it  was  valid  and  binding.  Bridgeport  Bank  v.  Dyer, 
19  Conn.  136. 

6.  Rules  of  law  as  to  the  powei'S  of  bank  officers  and  agents  are  affected 
by  usage,  as  where  the  usage  is,  that  in  the  absence  of  the  cashier  the 
president  signs  drafts  and  checks,  the  president's  signature  under  such 
circumstances  binds  the  bank.     Palmer  v.  Yates,  3  Sandf.  137. 

7.  Paper  not  negotiable  by  general  law  may  be  so  by  custom  of  a 
locality.     Rindskoff  v.  Barrett,  11  Iowa,  172. 

8.  The  rule  that  collecting  bank  has  no  right  to  receive  anything  but 
money.     Levy  v.  Nat.  Bank,  7  Cent.  L.  J.  247.     See  note  19  a. 

9.  The  rule  that  a  banker  must  know  the  signature  of  his  customer, 
and  pays  a  forged  check  at  his  peril.  As  where  it  was  customary  for  a  bank 
receiving  a  check  on  another  bank  to  make  inquiries  as  to  the  genuine- 
ness of  the  signature,  the  drawee  bank  receiving  the  check  from  such  bank 
is  protected  as  to  it  in  assuming  that  such  inquiries  have  been  made. 
Ellis  V.  Ohio  Life  Ins.  &  Trust  Co.,  4  Ohio  St.  628. 

10.  A  custom  of  common  carriers  and  messengers  to  leave  parcels  or 
notices  directed  to  a  particular  officer  of  the  bank  at  some  especial  desk, 
or  with  some  officer  other  than  the  one  named,  may  be  shown ;  and  deliv- 
ery made  in  accordance  with  such  custom  will  be  a  sufficient  discharge  of 
his  duty  on  the  part  of  the  carrier  or  messenger.  Hotchkiss  v.  Artisans' 
Bank,  42  Barb.  517. 

11.  An  established  custom  that  notices  intended  for  the  directors 
shall  be  left  upon  the  cashier's  desk,  will  bind  any  director  whose  own 
notes  may  happen  to  come  into  the  bank.  "Weld  v.  Gorham,  10  Mass. 
366. 

"  No  usage  can  be  set  up  against  the  clear  intent  of  the  parties.  The 
whole  idea  of  the  law  is,  that  when  the  parties  say  nothing  about  the 
manner  in  which  the  contract  is  to  be  performed,  or  the  precise  mean- 
ing they  attach  to  the  terms  employed,  or  acts  done,  their  meaning  and 
intent  may  be  arrived  at  by  looking  to  the  usual  manner  of  doing  such 

23 


§  9  PRELIMINARY. 

in  some  way,  and  it  is  more  probable  they  intended  a  usual 
than  an  unusual  method.     See  note  12. 

business,  and  the  usual  meaning  and  obligations  attached  to  such  words 
and  acts. 

The  theory  is  that  the  parties  knew  the  custom,  and  acted  in  reference 
to  it,  but  if  they  expi'ess  a  contrary  intent  the  theory  fails.  Barnard  v. 
Kellogg,  10  Wall.  383 ;  Callender  v.  Diusmore,  55  N.  Y.  200. 

^1  A  usage  of  a  bank  cannot  bind  a  party  who  has  no  occasion  to  be- 
lieve he  will  be  brought  witliin  its  operation.  Mohawk  Bank  v.  Bro- 
derick,  13  Wend.  133. 

If  there  is  no  intimation  whatsoever  upon  a  note,  that  the  maker  in- 
tended or  expected  that  it  would  be  negotiated  at  a  particular  bank,  he 
is  not  bound  by  the  fact  that  he  has  positive  knowledge  of  the  usage  of 
such  bank  in  regard  to  notice,  &c.  upon  such  notes.  For  it  does  not 
appear  that  he  anticipated  that  his  note  would  ever  come  into  this  bank, 
and  therefore  that  this  usage  would  be  applied  to  this  particular  note. 
The  case  of  the  Lime  Rock  Bank  v.  Hewett,  52  Me.  531,  furnishes  an 
unusually  excellent  illustration  of  this  doctrine.  Two  notes  were  sued 
upon  in  that  case,  and  the  same  person  was  an  indorser  upon  each.  One 
of  them  was  made  payable  at  the  bank,  and  was  indorsed  over  by  him  to 
tlie  bank.  The  other  was  not  made  payable  at  the  bank,  and  was  in- 
dorsed by  him  generally;  indeed,  there  were  subsequent  indorsers  before 
the  note  came  into  the  possession  of  the  bank.  The  indorser  was  shown 
to  be  personally  conusant  of  a  usage  of  the  bank  in  notifying.  Upon 
the  first  note  it  was  held  that  he  was  bound  by  this  usage;  that  the  cir- 
cumstances constituted  a  conclusive  presumption  of  liis  assent,  and  would 
have  been  equally  conclusive  of  his  knowledge  had  tliis  not  been  other- 
wise expressly  shown.  But  upon  the  second  note  he  was  held  not  bound 
by  the  usage.  For  though  he  knew  it,  yet  it  was,  as  regarded  this  note, 
a  mere  abstract  fact,  there  being  nothing  whatsoever  to  show  that  he 
ever  contemplated  that  the  note  should  pass  into  the  possession  of  this 
especial  bank,  or  be  subjected  to  the  effect  of  any  of  its  usages.  A 
usage  cannot  directly  affect  parties  between  whom  there  is  no  privity  of 
contract.  Daun  v.  City  of  London  Brewery  Co.,  L.  R.  8  Eq.  155.  But 
it  is  hardly  correct  to  say  it  cannot  affect  them  indirectly;  there  being 
no  contract  between  those  parties,  it  cannot  take  effect  as  part  of  such  a 
contract. 

But  contracts  and  usages  between  A.  and  B.  are  far  from  being  without 
effect  on  the  rights  of  C.  and  B.,  though  the  latter  have  not  contracted 
with  each  other.  For  example,  a  by-law  or  usage  of  a  bank,  securing  a 
lien  on  shares  of  a  stockholder,  S.,  may  affect  S.'s  assignee  in  insolvency, 
or  an  attaching  creditor. 

A  by-law  of  a  bank,  or  even  its  usage,  if  the  usage  be  known  to  the 
stockholders,  of  refusing  to  allow  any  stockholder  to  transfer  his  stock  so 
24 


USAGE.  §  9 

(e)  But  the  law  will  not  presume  an  intention  to  waive 
valuable  rights  ^*  unless  there  is  an  agreement  or  understand- 
ing to  that  effect,  nor  will  it  ever  enforce  a  usage  that  is 
unreasonable  or  contrary  to  positive  law. 

long  as  he  is  indebted  to  the  bank,  is  valid  and  bindinsf.  The  bank  has 
a  lien  upon  the  shares  for  the  amount  of  its  claim,  at  least  as  against 
the  shareholder  himself,  or  against  his  assignees  under  a  voluntary  as- 
signment for  the  benefit  of  creditors.  Morgan  v.  Bank  of  North  America, 
8  Serg.  &  R.  73;  McDowell  v.  Bank  of  Wilmington,  1  Harr.  369;  Child 
V.  Hudson's  Bay  Co.,  2  P.  Wms.  207.  But  whether  or  not  the  lien  of 
the  bank  would  be  good  as  against  an  assignee  in  bankruptcy,  or  an 
attaching  or  execution  creditor,  is  a  different  question,  which  might 
perhaps  receive  a  different  answer.  In  Massachusetts  the  point  has 
been  considered  doubtful.  Nesmith  v.  Washington  Bank,  6  Pick.  329; 
Plymouth  Bank  v.  Bank  of  Norfolk,  10  id.  454.  So  usage  bears  on 
negligence. 

In  the  Daun  case,  A.  and  B.  contracted.  A.  afterward  contracted  with 
C,  subject  to  his  contract  with  B.  B.  attempted  by  usage  Real  ground 
to  hold  A.'s  funds  as  against  C.  to  a  greater  amount  than  the  Daun'case  ^ 
express  terms  of  the  agreement  between  A.  and  B.  warranted,  should  rest. 
Such  a  usage  might  affect  A.,  but  was  too  remote  to  be  reasonably  pre- 
sumed within  C.'s  contemplation. 

12  Usage  may  explain  doubtful  words,  or  even  add  terms  to  a  contract. 
Carter  v.  Phil.  Coal  Co.,  77  Pa.  St.  286;  Lyons  v.  Culbertson,  83  111.  33  ; 
Miller  v.  Burke,  68  N.  Y.  615;  Stevens  v.  Reeves,  9  Pick.  197;  A  con- 
tract for  excavation  of  certain  lots  was  silent  as  to  who  should  have  the 
sand,  &c.  taken  out,  and  an  established  usage  giving  such  materials  to 
the  excavator  was  allowed  to  add  this  term  to  the  contract.  Cooper  v. 
Kane,  19  AVend.  386. 

"  Where  parties  have  not  entered  into  any  express  and  specific  con- 
tract, a  presumption  nevertheless  arises  that  they  meant  to  contract  and 
to  deal  according  to  the  general  usage,  practice,  and  understanding,  if  any 
such  exists,  in  relation  to  the  subject  matter."  2  Stark  Ev.  §  258,  259; 
1  Phil.  Ev.  420,  421.  But  if  the  usage  is  narrow,  the  presumption  may  be 
rebutted  by  proof  of  one  party  that  he  was  ignorant  of  it,  and  did  not 
impliedly  assent  to  it.  Sawtelle  v.  Drew,  122  Mass.  228;  Farmers  & 
Mechanics'  Bank  v.  Sprague,  52  N.  Y.  605;  Walls  v.  Bailey,  49  N.  Y.464. 

13  Some  judges  are  inclined  to  follow  the  early  English  decisions,  others 
the  later  ones,  which  are  far  more  liberal  in  admitting  evidence  of  usage 
than  the  former.  At  first,  usage  was  permitted  to  explain  doubtful  terms, 
afterward  it  was  further  conceded  power  to  add  terms  to  contracts 
though  in  writing,  i.  e.  usage  in  reference  to  which  the  contract  is 
presumably  made  is  a  part  of  the  contract. 

"  See  note  9. 

25 


§  9  PRELIMINARY. 

(d)  And  if  the  usage  is  in  the  nature  of  a  contract  be- 
tween other  parties,  as  in  the  case  of  clearing-house^^ 
usages  and  by-laws,^''  it  will  not  enter  into  any  transactions 
except  those  of  members  or  parties  to  the  usage,  unless  it  is 
shown  that  the  contract  was  actually  with  reference  to  such 
usage. 

One  who  employs  a  member  of  the  clearing-house  cannot 
claim  the  advantage  of  such  usage  nor  be  prejudiced  by  it. 
It  is  deemed  extrinsic  unless  brought  in  ])y  the  parties. 

So  with  by-laws  and  usages  of  the  bank  for  its  internal 
affairs. 

Though,  of  course,  in  such  cases,  third  parties  may  be  in- 
directly ^^  affected,  as  in  respect  to  the  question  of  authority 
of  bank  officers.  And  usage  often  affects  parties  between 
whom  there  is  no  contract,  by  determining  the  question  of 
negligence.^^ 

A  usage  to  do  a  thing  cannot  have  the  same  effect  as  a 
performance,"  if  in  fact  the  thing  was  not  done. 

15  See  note  11  and  §  316.     See  By-laws,  §  43  b, 

18  See  note  11. 

Judge  Story  says  in  his  work  on  Bailments,  §  11,  that  in  every  com- 
munity negligence  is  to  be  judged  of  by  the  actual  state  of  society,  the 
habits  of  business,  the  general  usages  of  life,  and  the  dangers  as  well  as 
the  institutions  peculiar  to  the  age. 

A  hotel  guest  leaves  the  key  in  his  door.  The  usage  of  guests  at  that 
hotel  is  relevant  to  the  question  of  negligence.  Berkshire  Woollen  Co. 
V.  Proctor,  7  Cush.  417. 

So  drivers  of  horses  and  wagons  on  the  highways,  and  masters  and 
pilots  of  boats,  not  passing  each  other  in  the  usual  way,  are  negligent, 
unless  there  is  good  reason  for  the  variance.  Tueley  v.  Thomas,  8  Car.  & 
P.  104;  The  City  of  Washington,  92  U.  S.  31. 

"  Piscataqua  Exchange  Bank  v.  Carter,  20  N.  H.  246,  and  Central  Bank 
V.  Davis,  19  Pick.  373,  rest  on  the  ground  that  a  usage  for  an  iudorser  to 
waive  demand  and  notice  is  not  equivalent  to  a  waiver,  if  he  in  fact  does 
not  in  a  given  transaction  waive  it.  If  a  by-law  requires  a  person  having 
a  certain  transaction  with  a  bank  to  perform  a  certain  act,  and  he  in  fact 
does  not  perform  it,  he  cannot  be  affected  with  the  legal  consequences  of 
a  performance  on  the  ground  that  it  was  a  usage  of  the  bank  to  require 
performance,  that  he  knew  the  usage,  and  must  be  assumed  to  have  in- 
tended to  conform  to  it.  It  was  said,  that  the  usage  claimed,  if  proved, 
would  be  only  a  usage  for  the  customer  to  make  such  an  agreement.  By 
26 


USAGE.  §  9 

(e)  When  there  are  several  methods  of  different  degrees 
of  usuahicss,  it  often  becomes  dilhcult  to  decide  which  shall 
control  the  transaction.  In  such  cases,  the  relation  of  the  par- 
ties, and  their  actual  Jcnoivledge,  are  of  importance  in  deter- 
mining whether  the  more  special  usage  shall  outweigh  the 
more  general. 

A  general  usage  of  merchants,  judicially  ascertained  and 
established,  becomes  a  part  of  the  common  law  that  all  are 
held  to  know,  whether  they  do  or  not ;  but  in  the   j  ^^  mer- 
case  of  usages  peculiar  to  a  single  bank,  or  to  the   <^^ant. 
banks  of  a  city  or  locality,  the  above  points  must  be  regarded. 

A  course  of  dealing  ^^  between  the  bank  and  a  single  per- 
son may  establish  obligations  as  to  its  continuance,  and,  if 

strict  construction,  therefore,  it  would  not,  even  if  fully  shown,  have  any 
effect  upon  a  transaction  in  which  the  agreement  was  distinctly  not 
made. 

"  (a)  Hotchkiss  v.  Artisans'  Bank,  42  Barb.  517. 

(ft)  Presumptions  established  by  Course  of  Dealing. — The 
course  of  dealing  between  two  banks  may  be  given  in  evidence  for  the  pur- 
pose of  raising  a  presumption  from  it.  This  is  not  precisely  a  usage ;  that  is 
to  say,  it  is  not  always  necessary  that  it  should  bind  the  banks  as  an  arbi- 
trary rule  for  the  conduct  of  their  affairs  with  each  other.  Therefore  the 
inference  based  upon  it  is  not  absolutely  conclusive,  but  is  capable  of  be- 
ing rebutted  by  proof  that  the  habitual  course  of  dealing  had,  in  the  par- 
ticular instance,  been  departed  from.  It  is  strictly  as  a  habit,  which 
gives  rise  to  certain  natural  suppositions,  not  as  a  legal  usage  which 
imperatively  establishes  those  suppositions  as  facts,  that  such  evidence  is 
admitted.  Thus,  that  two  banks  are  wont  to  exchange  accounts  at  short 
intervals,  and  each  promptly  to  object  to  the  account  rendered  by  the 
other,  if  it  claims  any  error  therein,  —  and  that  such  accounts  have  been 
rendered  covering  a  point  subsequently  disputed,  but  not  objected  to 
within  the  usual  time,  —  are  acts  admissible  in  evidence,  as  going  to 
show  actual  correctness,  and  that  the  correctness  has  been  acknowledged. 
But  the  same  evidence  would  be  incompetent  to  establish  a  usage  be- 
tween the  banks  of  objecting  promptly,  which  should  have  the  effect  of 
estopping  the  bank  which  had  failed  so  to  object  from  afterwards  claim- 
ing the  correction  of  the  error.  Union  Bank  v.  Planters'  Bank,  9  Gill  & 
J.  439. 

(c)  It  is  only  as  affecting  the  question  of  notice  that  the  generality  of 
a  usage  is  material;  for  a  practice  may  exist  between  two  only,  and  yet 
bind  them  in  all  subsequent  dealings,  unless  abrogated  by  both.  Hotch- 
kiss V.  Artisans'  Bank,  42  Barb.  517. 

27 


§  9  PRELIMINARY. 

,f  ,    r^   ,  nothing   is   provided  to  the  contrary,  will  ffovcrn 

Mode  of  deal-  .  .  7  © 

iiig  between    Subsequent  transactions,  of  the  same  nature,  between 

tlie  parties.       , , 

them. 
The  usage  of  a  single  bank  will,  by  reason  of  the  relation 
of  the  parties,  bind  all  who  select  ^'^  that  bank  to  act  for  them, 

1^  («)  Boston  Bank  v.  Hodges,  9  Pick.  420;  Bank  of  Columbia  v.  Ma- 
gruder,  6  Har.  &  J.  172;  Lincoln  &  Kennebeck  Bank  v.  Page,  9  Mass. 
155;  Cohear.  Hunt,  2  Sm.  &  M.  227;  Smith  v.  Whiting,  12  Mass.  8; 
Mills  V.  Bank  of  the  United  States,  11  Wheat.  431 ;  Chicopee  Bank  v. 
Eager,  9  Met.  584;  Lime  Rock  Bank  v.  Hewett,  52  Me.  531;  Gindat  v. 
Mechanics'  Bank,  7  Ala.  325.  Li  Mills  v.  Bank  of  the  United  States  it 
was  ruled  that,  where  a  note  is  made  for  the  purpose  of  being  negotiated 
at  a  bank  whose  custom  it  is  to  demand  payment  and  give  notice  on  the 
fourth  day  of  grace,  that  custom  binds  the  parties  whether  they  knew  of 
it  or  not.  By  implication  they  agree  to  be  governed  by  the  usage  of  the 
bank  at  which  they  have  chosen  to  make  the  security  negotiable.  A.  sent 
a  note  to  bank  C.  to  collect;  D.,  the  debtor,  paid  a  certificate  of  deposit 
of  C.  to  it  to  satisfy  the  note.  A.  was  held  bound  by  the  custom  of  C.  to 
take  its  certificates  of  deposit  in  lieu  of  cash,  and  D.  was  discharged, 
although  the  bank  became  insolvent,  and  never  remitted  to  A.,  and  in 
spite  of  the  rule  of  law  that  an  agent  can  take  nothing  but  money. 
British  &  American  Mortgage  Co.  v.  Tibballs,  63  Iowa,  468,  Reed,  J. 
dissenting. 

In  Bank  of  Utica  v.  Smith,  18  Johns.  230,  a  note  payable  at  the  Me- 
chanics' Bank  was  presented  fifteen  minutes  after  bank  hours  for  other 
business ;  but  it  appeared  that,  according  to  the  usual  course  of  business 
at  this  bank,  such  presentments  were  made  at  this  time,  and  the  defend- 
ant should  have  informed  himself  of  it. 

(i)  But  the  fact  that  one  is  the  holder  of  a  check  drawn  upon  a  bank,  or 
the  debtor  upon  a  note  held  by  it  for  collection,  or  is  the  payee  of  paper 
made  payable  at  its  office,  does  not  bring  such  person  within  either  the 
reason  or  the  language  of  these  decisions.  lie  is  not  a  customer,  nor,  in 
the  sense  in  which  the  word  is  used  in  these  cases,  is  he  one  dealing  with 
the  bank.  He  is  therefore  held  to  no  knowledge  of  any  peculiar  habit  of 
this  individual  bank.  He  must  assume,  unless  he  has  positive  knowledge 
to  the  contrary,  that  it  conducts  its  transactions  like  the  other  banks  in  the 
same  place;  and  its  usage  to  conduct  them  differently  in  any  respect  must 
be  specially  brought  home  to  him  before  it  can  affect  him  disadvantageously. 
But  the  custom  of  the  single  bank,  once  known,  enters  into  all  subse- 
quent contracts  and  dealings  with  it.  Patriotic  Bank  i'.  Farmers'  Bank, 
2  Cranch,  C.  C.  560;  Renner  v.  Bank  of  Columbia,  9  Wheat.  582;  City 
Bank  v.  Cutter,  3  Pick.  414;  Bridgeport  Bank  v.  Dyer,  19  Conn.  136. 
The  doctrine  is  very  clearly  put  by  Mr.  Justice  Story  in  Mills  r.  Bank  of 
United  States,  li  a  note  is  made  payable  at  a  particular  bank,  there  is 
28 


USAGE   OF   A   SINGLE   BANK.  §  9 

as  one  who  is  a  customer  of  the  bank,  or  making 
use  of  the  facilities  it  holds  out.     A  depositor  in   liar  u.  one 
a  bank,  or  one  who  gives  a  note  to  a  bank  to  collect, 
or  makes  his  notes  payable  there,  is  properly  held  impera- 
tively to  an  implied  knowledge  of  its  legal  usage  in  dealing 
with   depositors,   collecting   or   paying   such   notes.     So   an 
indorser  of  a  note  payable  at  the  bank,  for   he   selects   or 
adopts  as  to  subsequent  parties,  and  as  to  the  bank. 

But  the  holder  of  a  check  on  the  bank,  or  payee  of  a  note 
payable  there,  or  debtor  on  a  note  held  by  it  for  collection, 
did  not  choose  that  bank  to  act  for  him,  and  has  a  right  ^^  to 
assume  that  it  transacts  its  affairs  like  other  banks  in  the 
same  place,  unless  he  has  actual  knowledge  of  its  peculiar 
custom;  then  he  is  bound  by  it,  if  the  bank  entered  as  a  factor 
into  the  transaction  within  the  contemplation  of  the  parties. 

no  ground  for  demanding  that  the  bank  shall  depart  from  "general  com- 
mercial usage  "  for  any  other  purpose  than  that  of  conforming  to  its  own 
individual  usages.  Evidence  of  the  usage  of  any  number  of  other  banks 
not  amounting  to  "  general  commercial  usage  "  is  inadmissible  to  fix  the 
duties  of  this  especial  bank,  unless  conformity  to  this  particular  usage 
and  adoption  of  it  can  also  be  brought  home  to  this  bank.  It  cannot  be 
supposed  that  ^^  the  particular  usage  of  other  banks  not  mentioned  in  the 
contract "  ever  fell  within  the  contemplation  of  the  parties  to  that  con- 
tract.    Camden  v.  Doremus,  3  How.  515. 

(c)  Usages  of  a  bank  actually  known  bind  dealers  with  it.  Lincoln  & 
Kennebec  Bank  v.  Page,  9  Mass.  155;  Jones  v.  Fales,  4  Mass.  252.  If 
there  is  a  general  usage  applicable  to  a  business,  one  employing  an  indi- 
vidual of  that  profession  contracts  in  reference  to  the  usage.  Walls  v. 
Bailey,  49  N.  Y.  464;  Ford  v.  Terrell,  9  Gray,  401;  Lowe  v.  Lehman,  15 
Ohio  St.  179;  Carter  v.  Philadelphia  Coal  Co.,  77  Pa.  St.  286;  Sewell  v. 
Corp,  1  Car.  &  P.  392.  The  fact  that  a  depositor  in  a  savings  bank  was 
illiterate,  and  could  not  read  the  rules  in  his  bank-book,  did  not  excuse 
his  non-compliance  with  a  reasonable  rule  requiring  notice  of  loss  of  the 
book.     Burrill  v.  Dollar  Savings  Bank,  92  Pa.  St.  134  (1879). 

2"  It  is  very  proper  that  one  who  deliberately  employs  a  bank  should 
be  held  to  adopt  it,  usages  and  all,  so  far  as  they  are  legal  and  reasonable, 
&c. ;  and  also  that  one  who,  like  the  holder  of  a  check,  has  nothing  to  do 
with  choosing  the  bank,  and  for  whom  the  bank  is  not  acting,  should  be 
held  to  less  diligence  in  informing  himself  of  its  usages;  and  in  case  of  a 
debtor  on  a  note  the  bank  holds  for  collection,  it  may  often  occur  that  the 
debtor  had  no  reason  to  suppose  that  particular  bank  would  transact  the 
business.     See  note  19  b. 

29 


I  9  PRELIMINARY. 

No  one,  however,  is  held  to  a  bank's  usage,  though  he  knows 
it,  if  that  bank  was  not  contemplated  as  connected  with  the 
business.     Such  knowledge  is  extrinsic.     See  note  11. 

It  might  be  thought  that,  whenever  a  person  enters  into  a 
transaction  in  which  he  is  reasonably  aware  a  particular  bank 
will  enter  as  a  factor,  he  should  be  held  by  its  customs,  known 
to  him  or  not ;  but  though  this  principle  is  recognized  in  re- 
gard to  usages  one  degree  superior  in  generality,  the  above 
distinction  breaks  in  upon  it  in  respect  to  single  usage. 

The  general  usage  of  all  or  a  majority  of  the  banks  in  a 
place,  town,  city,  or  county,  is  held  to  be  known  to  all  in  the 
General  particular  community,  and  all  who,  though  dwell- 
usage.  ing  elsewhere,  enter  into  transactions  which  they 

must  be  presumed,  as  men  of  ordinary  foresight,  to  know  will 
involve  a  dealing  with  or  through  the  banks  of  said  place.^i 

A.  Cases  on  Usage. — The  usage  of  a  bank,  known  to  per- 
sons dealing  with  it,  binds  them.22 

A  usage  known  to  the  defendant  is  proper  evidence  for  the 
jury  as  to  the  contract  of  the  parties.^^ 

The  common  law  and  the  general  law  merchant  are  in  many 
cases  controlled  by  usage.^* 

In  Connecticut,  D.,  the  holder  of  a  check,  got  it  cashed  at 
the  B.  Bank,  whose  custom  it  had  been  for  years  to  send 
Time  of  for-  chccks  to  Ncw  York  (where  this  was  payable)  by 
dTcS"^'  the  captain  of  a  boat,  once  a  week,  instead  of  by 
mail.  The  jury  found  that  D.  knew  of  this  usage,  and  the 
court  held  him  bound  by  it.^ 

'-ii  Generally  speaking,  it  cannot  be  presumed  that  a  person  is  acquainted 
with  the  customs  of  doing  business  which  obtain  among  the  banks  of  any 
place  distant  from  that  in  which  he  himself  lives  and  deals.  But  if  he 
enters  into  any  transaction  which  he  is  aware  must  reasonably  be  expected 
to  involve  a  dealing  with  or  through  the  banks  of  the  distant  place,  his 
knowledge  of  and  assent  to  their  customs  will  be  implied.  This  is  only 
a  slight  extension  of  the  principle  which  declares  every  person  dealing 
with  a  bank  to  be  affected  with  knowledge  of  its  usages,  and  is  supported 
by  the  cases  which  assert  that  doctrine.  Bank  of  Washington  v.  Triplett, 
1  Pet.  25. 

22  Lincoln  &  Kennebec  Bank  v.  Page,  9  Mass.  155. 

28  Jones  r.  Fales,  4  Mass.  252.  24  Halsey  v.  Brown,  3  Day,  346. 

26  Bridgeport  Bank  v.  Dyer,  19  Conn.  136  (1848). 

30 


KNOWLEDGE   OP   USAGE. 


§9 


So,  where  an  indorser  for  whom  a  note  was  discounted  by 
the  City  Bank,  knew  of  its  custom  to  regard  Har-   Time  of  de- 
vard  Commencement  as  a  holiday,  he  was  bound  by   JTou'd""'^ 
the  usage.^^ 

B.  Those  who  deal  with  a  bank  by  drawing  and  indors- 
ing notes  payable  at  the  bank,  and  negotiating  notes  for 
discount  there,  are  bound  by  its  usages  known  to  them.'^  In 
this  case  an  indorser  of  a  note  payable  to  himself  at  the 
L.  and  K.  Bank  was  held  by  its  particular  customs  known 
to  him.2' 

C.  Where  a  note  was  payable  in  the  District  of  Colum- 
bia, the  general  usage  of  the  banks  there  being  to  make 
demand  on  the  fourth  day  after  the  time  limited  in  the  note 
for  its  payment,  and  a  bank  there  discounted  it,  the  indorser, 
who  knew  of  the  custom,  was  bound  by  it.^^ 

Where  a  note  was  payable  to  Mills,  at  the  United  States 
Bank,  and  Mills  indorsed  it,  he  was  bound  by  the  usage  to 
make  demand  on  the  fourth  day,  though  he  had  no  knowledge 
of  it.  The  court  said :  "  Upon  the  principles  and  reasoning 
of  the  former  case  (Renner's)  we  have  come  to  the  conclusion 
that,  when  a  note  is  made  payable  or  negotiable  at  a  bank 
whose  invariable  usage  it  is  to  demand  payment  and  give  no- 
tice on  the  fourth  day  of  grace,  the  parties  are  bound  by  that 
usage,  whether  they  have  a  personal  knowledge  of  it  or  not. 
In  the  case  of  such  a  note,  the  parties  are  presumed  by 
implication  to  agree  to  be  governed  by  the  usage  of  the 
bank  at  which  they  have  chosen  to  make  the  security  itself 
negotiable."  '^^ 

D.  In  Alabama,  it  was  held,  following  11  Wheaton,  that, 
where  a  bill  appears  on  its  face  to  be  payable  at  a  particular 
bank,  the  particular  usage  of  such  bank,  of  giving  Notice  by 
notice   through   the   mail,  instead    of    personally,   ™*^^* 
though  the  party  is  in  the  same  place,  binds  the  parties  liable 

2«  City  Bank  v.  Cutter,  3  Pick.  418  (1826). 

"  Lincoln  &  Kennebec  Bank  v.  Page,  9  Mass.  155  (1812) ;  Smith  v. 
Whiting,  12  Mass.  8. 

28  Renner  r.  Bank  of  Columbia,  9  Wheat.  582  (1824).    A  strong  case. 

29  Mills  V.  Bank  of  the  United  States,  11  Wheat.  438  (1826). 

31 


§  9  PRELIMINARY. 

on  such  bill  (indorsers  in  this  case),  though  the  usage  was 
unknown  to  thera.^*^ 

E.  Where  it  was  the  custom  of  a  particular  bank  to 
devote  fifteen  minutes,  after  the  close  of  banking  hours  for 
the  general  business,  to  paying  notes  made  payable  at  that 
bank,  and  a  note  so  payable  was  presented  in  those  fifteen 
minutes,  it  was  held  a  good  presentment.  The  indorser  of 
the  note  payable  at  the  bank  should  have  informed  himself  of 
its  usages.^^ 

F.  Evidence  of  usage  is  not  considered  as  breaking  in 
on  the  rule  that  parol  shall  not  be  admitted  to  vary  a  written 
contract.  The  usage  is  considered  as  a  part  of  the  contract, 
and  the  evidence  is  admitted  to  explain  the  meaning  of  the 
parties.^2 

G.  The  head-note  to  an  Illinois  case  would  seem  to 
break  in  on  the  views  advanced  in  the  analysis  at  the  head 
Usage.  of  this  chapter.     It  says  :  "  The  fact  that  the  city 

Specific  f  J  J 

deposits.  bank,  which  was  not  the  correspondent  of  the 
home  bank,  in  pursuance  of  instructions  from  that  bank, 
and  in  the  line  of  custom  of  the  city  banks,  deposited  the 
money  (left  with  it  for  transmission  to  the  home  bank)  with 
another  city  bank  which  was  the  correspondent  of  the  home 
bank,  will  not  exempt  it  from  liability,  where  the  original 
depositor  is  unacquainted  with  such  custom  and  instruc- 
tions." 

The  fact  was,  that  the  court  said :  "  It  is  not  necessary  in 
this  case  to  determine  the  effect  to  be  given  to  that  general 
usage  among  city  banks." 

The  decisive  consideration  was,  that  the  depositary  bank 
sent  the  money  to  the  correspondent  of  the  home  bank  with- 
out any  notice  of  the  true  ownership,  so  that  it  was  applied 
on  the  debt  of  the  home  bank  to  said  correspondent,  and  lost 
to  the  depositor,  the  home  bank  being  insolvent.^ 

80  Gindrat  v.  Mechanics'  Bank,  7  Ala.  333  (1845). 

81  Bank  of  Utica  v.  Smith,  18  Johns.  230  (1820). 

82  Ilalsey  v.  Brown,  3  Day,  316;  Renner  v.  Bank  of  Columbia,  9 
Wheat.  582. 

83  Drovers'  National  Bank  v.  O'llare,  18  Brad.  3G0  (1887). 

32 


FORCE   OF   STATE   DECISIONS.  §  10 

§  10.  Conflict  betw^een  State  and  Federal  Courts  as  to  Com- 
mercial Questions.  —  Under  the  Jiuiiciury  Act,^  e.xcept  where 
the  Constitution,  treaties,  or  statutes  of  the  United  States 
otherwise  provide,  the  laws  of  the  several  States  shall  be 
reerarded  as  rules  of  decision  in  trials  at  common  law  in 
the  United  States  courts,  in  cases  where  they  apply. 

But  this  has  no  ai)plication  to  (juestions  of  the  validity^  or 
impairment  of  contracts^  or  of  general  commercial  laiv^  or  any 
e.xtra-territorial  *  matter,  nor  does  it  compel  the  United  States 
courts  to  enforce  manifest  injustice.  The  United  States 
Supreme  Court  is  the  hi(/hest  authority  on  all  questions  of 
general  commercial  law. 

The  rule  is  confined  to  matters  strictly  intra-territorial  by 
the  law  of  nations,  local  statutes,  and  usages,  as  those  affect- 
ing; only  citizens  of  the  State,  or  real  estate,  and    intra-territo- 

'^  -^  '  E  T     '■!«'  matters. 

interests  of  a  fixed  and  permanent  nature,^  and  Limitations, 
the  decisions  of  the  State  court  of  last  resort  upon  such  mat- 
ters, and  the  construction  of  such  statutes,  will  be  binding  on 
the  Federal  courts,  subject  to  two  limitations :  1st.  No  State 
decision  on  general  commercial  law,'  nor  as  to  what  is  a  valid 
contract,  or  what  is  impairing  the  obligation  of  a  contract, 
binds  the  United  States  courts.^  If  it  did,  the  States  could 
set  at  naught  the  constitutional  prohibition  against  destruction 

1  §  10.  1789,  c.  20,  §  34. 

2  If  a  contract  is  valid  under  the  decisions  of  the  State  at  the  tiine  of 
the  contract,  it  will  be  held  good  in  the  Federal  courts,  although  a  subse- 
quent decision  of  the  State  declares  the  former  judgment  erroneous  and 
the  contract  bad.     Gelpecke  r    Dubuque,  1  AVall.  176. 

8  2  Story  on  the  Constitution,  .551 ;  Tlie  Gloucester  Ins.  Co.  r.  Younger, 
2  Curt.  338.  In  Austin  v.  Miller,  .5  McLean,  154,  a  certificate  of  deposit 
was  held  a  promissory  note,  in  spite  of  a  contrary  Ohio  decision,  it  being  a 
question  of  general  commercial  law. 

*  A  discharge,  under  Rhode  Island  bankrupt  laws,  from  all  debts  and 
contracts,  does  not  affect  a  contract  to  be  executed  in  a  foreign  conntry. 
Van  Reimsdyk  v.  Kane,  1  Gall.  371.  "  I  apprehend  a  limitation  of  the 
rule  giving  effect  to  State  decisions  must  arise  wlienever  the  subject 
matter  is  extra-territorial." 

6  Van  Reimsdyk  v.  Kane,  1  Gall.  371;  Bragg  v.  Meyer,  1  McAll.  411. 
If  applied  beyond  this,  it  would  enable  the  State  legislature  to  dry  up  the 
sources  of  Federal  jurisdiction. 

VOL.  I.  3  33 


§  11  PRELIMINARY. 

of  contract  rights.  2d.  State  judgments  arc  only  rules  of  de- 
cision, not  exclusive  or  peremptory  injunctions,^  and  will  not 
be  followed  in  the  face  of  justice  and  good  faith. 

State  statutes  or  decisions  affecting  rights  which  are  neither 
between  citizens  of  the  State  and  derived  under  that  State, 
Extra- territo-  ^^^^  ^^'®  govcrncd  by  the  lex  rei  sitce  under  the  law 
rial  matters.  Qf  nations,^  do  not  control  the  Federal  courts, 
though  recognized  as  entitled  to  respectful  consideration. 

Further,  on  questions  of  general  commercial  law,  i.  e. 
commercial  questions  not  dependent  on  local  statutes  or  local 
General  com-  usagc,  but  whicli  must  bc  dccidcd,  in  whatever  court 
merciai  law.  ^|^p^.  c^y\QQ^  q^  i\^q  general  princi])lcs "  of  tlie  com- 
mercial law  and  the  custom  of  merchants,  the  Federal  courts 
are  not  bound  by  State  decisions.  "  When  the  State  courts 
are  called  on  to  perform  the  like  functions  as  ourselves,  i.e. 
Construction  ^0  determine  on  general  reasoning  and  legal  analo- 
of  contract,  gjgg  y^^\^^^  jg  ^he  truc  cxpositiou  of  the  contract,  or 
what  is  the  just  rule  furnished  by  the  principles  of  commercial 
law  to  govern  the  case,  the  rule  of  the  Judiciary  Act  does  not 
apply."  7 

§  11.  The  Couflict  of  Laws.  —  It  would  not  be  proper  to 
attempt  any  complete  statement  of  the  principles  of  private 

«  The  words  of  Story  in  1  Gall.  371,  saying  further,  "If  a  State  -were 
to  declare  that  no  action  woiild  lie  on  a  contract  between  a  citizen  thereof 
and  a  foreigner,  or  a  citizen  of  another  State,  under  any  circumstances, 
or  were  to  say  that  interest  reserved  on  such  a  contract,  though  good  at 
the  place  of  contract,  should  be  void,  it  would  hardly  be  binding  on  the 
United  States  courts."  This  language  applies  only  to  extra-territorial 
matters  by  its  terms ;  but  the  whole  tone  of  the  Federal  decisions  is,  that 
they  will  not  enforce  manifest  injustice  in  an?/  case,  merely  because  a 
State  court  has  sanctioned  it. 

'  Story  in  Swift  v.  Tyson,  16  Pet.  1.  And  see  Kobinson  v.  Common- 
wealth, 3  Sum.  220.  In  Brooklyn  City,  etc.  R.  R.  Co.  v.  National  Bank 
of  Republic,  22  Albany  L.  J.  189,  a  note  was  given  as  collateral  on  a 
pre-existing  debt,  to  a  bank  in  New  York  by  a  citizen  of  New  York. 
The  question  was  if  the  bank  was  a  holder  for  value.  New  York  de- 
cisions said  no;  but  the  United  States  court  remarked  that  it  was  a 
question  arising  out  of  the  usage  of  the  commercial  world,  and,  not  having 
been  modified  by  local  statute,  the  Federal  courts  had  equal  powers  with 
the  State  courts  to  determine  such  questions. 

34 


CONFLICT   OF   LAWS.  §  12 

international  law  in  a  work  of  this  kind,  bnt  a  few  points  of 
chief  interest  to  us  may  be  noted,  and  a  caution  entered,  never 
to  omit  in  any  transaction  either  of  the  questions,  "  By  what 
system  of  law  is  this  matter  controlled?"  and,  "What  has 
that  law  to  say  on  the  sul)jcct?"  In  banking  and  all  mer- 
cantile business  that  continually  runs  its  roots  and  branches 
beyond  state  and  national  lines,  it  is  of  the  utmost  import  to 
keep  in  mind  the  effect  of  the  various  and  often  conflicting 
laws  that  may  apply  to  the  transaction. 

§  12.    Contracts  ^  are  governed, — 

1.    As  to  remedy ,2  by  the  lex  fori. 

1  §  12.  For  the  law  of  this  subject  reference  must  be  made  to  the 
works  of  Wharton  and  Story,  from  which  it  is  chiefly  derived  by  an  in- 
tellectual process  of  condensation.  The  indexes  of  those  books  will 
enable  any  point  to  which  no  reference  is  here  attached  to  be  verified  as 
well  as  if  all  the  many  sections  bearius^  upon  it  were  quoted  by  nie. 

"  The  law  of  the  court  in  which  suit  is  brought  governs  in  all  that  re- 
lates to  practice,  pleading,  burden  of  proof,  admissibility  of  evidence 
(including  the  competency  of  witnesses,  and  the  great  rules  of  exclusion, 
as  those  regarding  hearsay,  parol  evidence  to  affect  written  contracts  or 
explain  patent  ambiguities,  involving,  of  course,  the  determination  of 
what  in  ^patent  ambiguity),  and  the  determination  of  the  question  what 
facts  are  proved  by  the  evidence  admitted.  But  the  legal  effect  of  the 
facts  proved  by  the  evidence  admitted  may  depend  on  other  law,  to  which 
the  construction  of  the  contract  is  subject.     See  text,  nos.  3,  4,  7. 

If  a  Statute  of  Limitation  of  a  State  (I.)  only  says  no  action  shall 
be  brought  for  the  goods  or  debt  after  a  certain  period  (P.),  it  belongs  to 
the  remedy,  and  an  action  may  be  brought  in  another  State  (where  the 
period  is  longer)  for  the  debt  or  goods,  though  the  parties  both  lived  in  I. 
the  full  time  (P.)-  B'lt  if  the  statute  of  I.  changes  the  title,  or  extinguishes 
the  debt,  then  as  to  debts  due  citizens  domiciled  in  I.,  and  as  to  property 
■within  its  territoiy,  the  statute  once  taking  effect  will  not  be  disturbed 
elsewhere. 

If  a  Statutf.  of  Frauds  of  a  State  (I.)  merely  provides  that  no  action 
shall  be  brought  on  certain  cotitracts  unless  in  writing  or  conforming  to 
other  requirements,  it  is  of  the  remedy,  and  such  a  contract  (though 
made  in  a  foreign  country,  F.,  where  it  is  valid  and  enforceable,  there 
being  no  such  law  tliere)  will  not  be  enforced  in  I. ;  but  such  contract 
made  in  I.  may  be  enforced  in  F.  if,  however,  I.'s  statute  of  frauds 
makes  the  contract  iu)ifl,  it  acts  on  the  contract  itself,  and  not  the  remedy; 
and  in  such  case,  so  far  as  the  statute  of  frauds  is  concerned,  a  contract 
valid  where  made  is  valid  everywhere,  and  invalid  where  made  is  invalid 
everywhere,  except  that  (1)  the  lex  situs  controls  the  forms,  &c.  of  the 

35 


§  12  PRELIMINARY. 

2.  As  to  the  interpretation,^  by  the  law  and  usage  the 
parties  had  in  contemplation. 

3.  As  to  direct  ^  action  upon  real  estate,  (as  in  all  other 
matters  touching  immovables,  even  to  the  question  what 
])ropcrty  is  real,)  the  lex  rei  sitce  controls.*  But  the  word 
direct  is  very  important  in  this  connection,  for  there  is  a 
clear  distinction  ^  between  the  effect  of  a  contract  as  creating 

transfer  of  property  with  few  exceptions,  and  (2)  contracts  made  casually 
in  I.,  and  not  in  accord  with  its  law,  are  not  thereby  void  in  the  doniicil 
of  the  parties,  or  the  country  where  the  contract  is  to  be  performed.  See 
text,  nos.  6,  7. 

3  Any  court  that  has  to  interpret  a  document,  i.  e.  discover  the  mean- 
ing of  the  parties,  will  look  for  that  purpose  to  any  law  or  usages,  as  well 
as  any  facts,  the  author  or  parties  are  shown  to  have  had  in  mind.  Usu- 
ally the  parties  think  and  speak  in  the  terms  of  the  place  where  the  con- 
tract is  made ;  but  if  only  casually  there,  (as  travellers  on  a  railroad  or 
persons  coming  to  a  half-way  point  to  negotiate,)  it  is  more  likely  they 
contemplate  the  law  and  usage  of  their  domicil,  or  of  the  place  of 
performance. 

In  case  of  a  contract  by  correspondence,  the  usage  of  the  place  of  the 
writer  who  first  employs  controverted  terms  decides  their  meaning,  for  he 
is  supposed  to  use  them  in  the  sense  with  which  he  is  familiar,  and  the 
other  accepts  that  meaning  by  adopting  the  words. 

It  is  to  be  distinctly  noted,  however,  that  the  question  whether  any 
evidence  at  all  of  the  meaning  of  the  parties  concerning  the  point  in  dis- 
pute is  to  be  received,  is  a  preliminary  question  for  the  lex  fori;  and  also 
that,  if  there  is  conflict  between  what  the  author  really  meant  and  the 
meaning  attached  to  the  words  he  has  used  by  the  law  to  which  the  con- 
structiou  of  the  document  is  subject,  the  latter  controls. 

^  Titles  by  prescription,  grant,  devise,  descent,  marriage;  easements, 
servitudes;  liens;  incumbrances;  assignments  for  benefit  of  creditors; 
forms  of  conveyance  and  devise,  and  their  construction  ;  legitimacy  of  one 
claiming  as  heir  ;  capacity  to  acquire  or  convey  in  any  way.  Ilealty  can- 
not be  touched,  transferred,  or  incumbered  in  any  way  except  in  conformity 
to  the  lex  situs;  but  it  is  a  general  principle  of  the  lex  situs  in  all  civilized 
countries  to  give  effect  to  acts  done  in  other  sovereignties  and  valid  there, 
unless  they  are  contrary  to  the  positive  law,  or  the  ideas  of  morality,  jus- 
tice, and  public  policy  existing  in  the  situs. 

5  The  validity  of  a  mortgage  as  a  lien  on  the  land  is  controlled  by  the 
lex  situs;  but  the  legality  of  the  contract  to  which  the  mortgage  is  collateral 
is  determined  by  the  law  of  the  place  where  the  contract  is  made,  unless 
it  is  to  be  performed  elsewhere,  then  by  that  law. 

A  contract  illegal  by  the  law  of  its  place  is  inoperative,  though  secured 
86 


CONFLICT   OF   LAWS.  §  12 

a  lien  or  transferring  title  to  specific  property,  and    p^^^^„^^ 
its  effect  considered  simply  as  creating  obligations   |;««  Jistiac- 
between  the  parties.     For  example,  a  conveyance 
not  in  accord  with  the  law  of   Illinois,  where  the   land   is, 
but  valid  by  the  law  of  Massachusetts  where  it  is  executed, 
though  it  does  not  of  itself  change  the  title  to  the  land,  and 
an  Illinois  creditor  of  the  assignor  or  vendor  attaching  the 
land  after  the  conveyance  will  hold  against  the  conveyee ;  yet 
as  between  vendor  and  vendee   the  transaction  may  base  a 
judgment  for  damages^  against  the  vendor  if  he  refuses  to 
make  a  truly  valid  deed,  or  for  a  decree  of  the  chancellor " 
to  compel  him  to  do  so. 

Further  it  must  be  remembered  that  a  person  domiciled  in 
Massachusetts  would  be  estopped,^  as  it  were,  to  deny  the 
validity  of  a  transaction,  good  by  the  laws  of  that  Estoppel  by 
State,  unless  ^  the  reason  for  holding  the  act  invalid  domJc'i- 
in  Illinois  applies  to  the  case  of  such  a  person,  as  well  as  to 
that  of  a  citizen  of  Illinois. 

by  a  mortgage  on  land  in  a  State  where  such  a  contract  would  have  been 
good;  Tine  v.  Smith,  11  Gray,  38;  and  if  the  contract  is  good  by  its  law, 
it  is  not  invalid  because  the  mortgage  is  subject  to  the  law  of  a  State  by 
which  such  contract  would  be  bad  against  creditors.  Hoyt  v.  Thompson, 
19  N.  Y.  207. 

6  See  Wharton,  Confl.  of  Laws,  §  377. 

■^  Where  there  is  an  equity  between  the  parties,  a  court  of  chancery  (if 
the  defendant  is  domiciled  in  its  jurisdiction,  or  the  contract  is  perform- 
able  there,  and  relief  can  be  obtained  by  the  personal  obedience  of  the  par- 
ties, without  direct  action  on  the  property,  and  justice  cannot  otherwise 
be  done)  will  compel  the  party  to  take  specific  action  in  regard  to  the 
foreign  property,  as  to  deed  the  land  in  conformity  to  the  law  of  the 
situs.  But  no  bill  can  be  entertained  which  calls  for  direct  action  on 
the  land,  as  for  partition,  or  settlement  of  boundary.  Wharton,  §  288; 
Story,  Confl.  of  Laws,  §  545;  McCurdy's  App.,  65  Pa.  St.  291;  Wood  v. 
Warner,  15  N.  J.  Eq.  81;  Muller  v.  Dows,  94  U.  S.  444. 

8  An  assignment  in  New  York,  good  there,  is  valid  against  a  subse- 
quent attachment  by  a  citizen  of  New  York  of  property  in  Massachusetts, 
though  such  assignment,  as  against  creditors  resident  elsewhere  than  at 
the  place  of  domicil  of  the  assignor,  would  have  been  invalid  iu  Massa- 
chusetts.    Burdock  v.  Taylor,  16  Pick.  335. 

9  Green  v.  Van  Buskirk,  7  Wall.  139.  The  owner,  mortgagee,  and 
attaching  creditor,  D.,  were  all  domiciled  in  New  York.     D.  attached  the 

37 


§  12  PRELIMINARY. 

4.  As  respects  direct  action  upon  movables,  the  forms  of 
transfer  and  creating  liens  ^  positively  prescribed  by  the  lex 
situs  must  be  conformed  to,  and  all  claims  of  the  lex  situs  ^^ 
satisfied,  in  order  to  sustain  a  right  to  the  property  in  the 

property  (iron  safes)  in  Illinois.  The  United  States  Supreme  Court  held 
the  attachment  good  against  the  mortgagee,  though  New  York  bad  held 
the  contrary.  The  parties  to  the-  mortgage  had  not  conformed  to  the 
registry  laws  of  Illinois,  and  the  reason  for  holding  that  an  incumbrance 
invalid  in  such  a  way  has  no  effect  against  one  without  notice  applies 
strongly  to  every  case,  whether  the  creditor  attaching  be  a  citizen  of  the 
locus,  or  of  the  State  where  the  contract  was  made,  or  of  a  third  State; 
namely,  the  great  uncertainty,  confusion,  and  insecurity  that  would  result 
if  the  record  title  where  tangible  property  is  located  could  not  be  depended 
on.  If  a  purchaser  had  to  search  the  records  of  every  State  in  which  the 
owner  may  liave  dwelt  or  made  a  contract,  it  would,  to  say  the  least,  make 
the  obtaining  of  a  clean  title  somewhat  expensive,  and  men  would  prob- 
ably give  their  land  away  rather  than  undertake  to  make  a  good  title.  It 
seems  very  doubtful  if  the  mere  fact  of  domicil  is  ever  a  solid  reason  in 
any  of  these  cases  for  refusing  what  would  otherwise  be  admitted  justice. 
The  argument  that  by  choice  of  domicil  a  party  (D.)  submits  himself  to 
its  law,  is  not  more  weighty  than  the  counter  claim,  or  rather  has  its  true 
limits  disclosed  by  the  counter  proposition,  that  he  submits  to  that  latv  so 
far  as  it  extends,  but  does  not  contemplate  its  reaching  an  arm  between 
him  and  the  measure  of  justice  secured  to  men  in  general  under  the  law 
of  another  State  where  he  may  be,  or  where  property  he  claims  is  situated. 
If  the  law  of  the  situs  rests  on  reasons  of  abstract  justice  and  general  con- 
venience, D.  should  have  the  benefit  of  it.  If  the  provisions  of  the  situs 
are  merely  defensive,  only  for  self-preservation,  by  preferring  the  claims  of 
citizens  to  those  of  foreigners,  D.  does  not  fall  within  the  reason  of  the  law. 

If  a  lien  attaches  to  a  vessel  in  England,  valid  there,  but  invalid  by 
Louisiana  law  as  not  giving  possession  to  the  mortgagee,  and  the  vessel 
afterward  comes  to  Xew  Orleans,  where  persons  without  notice  supply 
materials  to  the  .ship,  the  Louisiana  courts  hold  the  lien  of  the  latter  prior 
to  the  English  incumbrance.     Wharton,  §§  323,  315,  357. 

But  under  United  States  statutes  a  duly  recorded  mortgage  on  a  vessel 
has  priority  over  a  lien  under  the  law  of  one  of  the  States  where  the  vessel 
may  subsequently  be,  for  materials  and  supplies  furnished  it.  Harrison 
V.  Sterry,  5  Cranch,  298. 

^0  Such  as  taxes,  and  the  claims  of  local  creditors  in  case  of  foreign 
bankruptcj'. 

The  situs  of  a  debt,  so  far  as  concerns  its  taxability,  is  the  domicil  of 
the  creditor,  for  there  the  fund  will  go;  and  also  so  far  .as  concerns  its 
assignability,  for  it  is  a  personal  right,  and  governed  by  his  personal 
law.     Wharton,  §§  363,  394. 
38 


CONFLICT    OF   LAWS.  §  12 

courts  of  the  situs,  subject  to  the  same  distinctions  personam 
rem,  and  estoppel  by  domicil,  as  above. 

5.  Capacity  of  dealing  with  realty  is  determined  by  the  lex 
sitUs ;  capacity  of  doing  business  is  determined  by  the  law 
of  the  place  of  the  transaction  plus  the  law  of  the  domicil  of 
the  actor,  whichever  most  favors  the  capacity  and  so  sustains 
the  transaction. 

6.  The  form  ^^  of  contracts  depends  on  the  lex  situs  of 
property  to  be  affected,  so  far  as  it  has  positive  provisions, 
in  other  respects  on  the  lex  loci  actus,  so  far  as  imperative 
and  applicable,  and  beyond  both  these  lines  on  the  law  of  the 
situs,  actus,  domicil,  place  of  performance,  or  other  law  with 
reference  to  which  it  can  be  shown  the  parties  acted. 

7.  In  all  respects,  not  covered  by  the  above,  the  law  of 
the  "  seat "  of  the  obligation,  i.  e.  its  place  of  performance, 
controls,  as  being  the  law  the  parties  presumably  had  in  mind, 
and  if  there  is  more  than  one  obligation  in  a  contract,  to  be 
performed  in  different  places,  each  is  governed  by  its  own 
distinctive  law.^^ 

11  Form  of  Deeds,  Contracts,  &c.  —  So  far  as  the  direct  effect  on 
property  is  concerned,  the  positive  provisions  of  the  lex  situs  must  be  fol- 
lowed. When  the  lex  situs  is  silent ;  or  if  we  look  at  the  contract  apart 
from  its  direct  effect  on  property;  or  if  the  contract  is  personal;  — 

a.  Provisions  of  the  lex  loci  actus  that  are  imperative  (i.  e.  made  by  that 
law  essential  to  the  validity  of  the  document)  must  be  conformed  to,  ex- 
cept that  our  courts  will  not  hold  Americans  contracting  in  China,  or  other 
uncivilized  country,  bound  to  conform  to  its  law.  And  when  parties  casu- 
ally in  a  State  execute  a  contract  there,  in  accord  with  the  law  of  their 
domicil,  or  of  the  place  of  performance,  or  lex  situs,  it  will  be  sustained. 

b.  The  forms  of  the  lex  fori  must  be  looked  to  when  they  are  condi- 
tions of  bringing  suit. 

c.  Where  the  lex  situs  and  lex  loci  are  not  imperative,  and  the  lex  fori 
does  not  require  a  certain  form  to  sustain  suit,  it  is  sufficient  if  the  docu- 
ment is  such  that  an  intent  to  give  it  legal  effect  can  be  inferred.  It  is 
a  natural  presumption  from  the  omission  of  the  forms  usual  where  the 
business  is  done,  that  the  instrument  is  not  intended  to  be  final,  but  only 
a  preliminary  informal  draft.  If  it  can  be  shown  that  the  parties  have 
actually  conformed  to  the  forms  usual  in  their  domicil,  or  in  the  place  of 
performance,  or  other  place  clearly  in  their  contemplation,  the  above  pre- 
sumption is  rebutted,  the  substantial  requisite  fulfilled,  and  the  contract 
should  be  sustained. 

39 


§  12  PRELIMINARY. 

The  construction,  nature,^^  mode,  and  legality  of  a  contract 
depend  on  the  law  of  its  seat. 

What  is  the  place  of  performance,  or  seat  of  the  contract, 
is  a  question  of  the  mutual  intent  of  the  parties,  to  be  derived 
from  their  language  and  the  circumstances. 

If  a  place  is  named,  of  course  there  is  no  trouble,  as,  in  case 
of  a  note,  the  place  of  payment  governs  as  to  the  mode  of 
payment,  grace,  demand,  protest,  and  noticc.^^ 

12  That  is,  whether  it  is  joint,  or  several,  or  joint  and  several;  absolute 
or  conditional ;  personal  or  real;  principal  or  surety;  negotiable  or  not. 

18  In  the  case  of  bills  and  notes  the  contract  of  the  maker  or  acceptor 
is  governed  by  the  place  of  payment,  which,  unless  some  other  is  named, 
is  the  place  where  the  contract  is  made,  usually  the  place  of  delivery.  See 
notes  15  and  18. 

If  a  blank  indorsement  in  France  does  not  pass  the  property  to  holder, 
such  an  indorsee  cannot  recover  in  England,  though  he  could  sue  in 
England  if  the  indorsement  had  been  made  in  England.  Trimbey  v. 
Vignier,  1  Bing.  N.  C.  151. 

A  parol  acceptance  by  B.  of  a  bill  drawn  in  Michigan  on  B.,  in  Chi- 
cago, was  good,  though  the  laws  of  Michigan  require  an  acceptance  to  be 
in  writing.     Mason  v.  Dousay,  35  111.  424. 

If  a  note  payable  in  Massachusetts  is  indorsed  in  another  State,  the 
maker's  liability  to  the  indorsee  is  ruled  by  Massachusetts  law.  Wood- 
ruff V.  Hill,  116  Mass.  310;  Hunt  v.  Hunt,  16  N.  Y.  Sup.  Ct.  622;  Evans 
V.  Anderson,  78  111.  558. 

But  the  contract  between  the  immediate  parties  to  an  indorsement  is 
subject  to  the  law  of  the  place  where  the  indorsement  is  made,  unless  an- 
other be  named  by  the  iudorser.  National  Bank  of  Michigan  v.  Green, 
33  Iowa,  140. 

The  working  of  these  principles  leads  to  some  curious  results:  — 

The  liability  of  an  iudorser  or  drawee  is  determined  by  the  liability  of 
the  maker  or  acceptor  at  their  contract  seat;  but  when  the  indorser's  lia- 
bility is  once  fixed,  the  law  as  to  payment  in  a  suit  against  the  indorser 
is  governed  by  the  law  of  the  place  of  indorsement.  Freese  v.  Brownell, 
35  N.  J.  L.  285;  Ripka  v.  Geddis,  20  Pa.  St.  140. 

If  a  bill  or  note  is  defective  in  formal  matters  at  the  place  where  made, 
but  good  at  the  place  of  indorsement,  the  indorsement  may  bind  the 
indorsers,  though  not  the  original  parties;  otherwise,  if  the  defect  is 
substantial.     Wharton,  §  458. 

So  a  transfer  defective  where  made,  but  valid  by  the  law  to  which 
the  maker  or  acceptor  is  subject,  binds  him,  though  not  the  indorser. 
Wharton,  §  459. 

Each  holder  has  the  same  rights  against  the  acceptor  or  maker  as  the 

40 


PLACE   OP   PERFORMANCE.  §  12 

Or  if  the  place  of  performance  is  fixed  by  the  necessity  of 
the  case,  as  when  work  is  to  be  done  on  land. 

The  seat  of  a  continuous  ^*  business  gives  its  law  to  all 
obligations  in  the  course  of  such  business  emanating  from 
him  who  conducts  the  business,  as  with  bank  collections. 

Delivery  of  goods  to  a  carrier  for  the  vendee  is  such  per- 
formance as  makes  the  place  of  delivery  the  seat  of  the  con- 
tract, which  determines  the  right  of  stoppage  in  transitu^  etc. 

The  parties  may  in  many  cases  incorporate  the  law  of  a 
particular  State  in  their  contract  by  reference  to  it. 

original  payee,  if  the  transfer  to  the  holder  was  good  by  the  law  of  the 
place  of  the  maker's  or  acceptor's  contract,  though  bad  by  the  law  where 
the  indorsement  was  made,  for  the  maker's  obligations  are  governed  by 
his  law.     Robertson  v.  Burdekin,  1  Ross  Lead.  Cases,  812. 

On  the  other  hand,  if  tlie  indorsement  is  bad  by  the  original  law, 
though  good  by  its  own  law,  the  maker  or  acceptor  is  not  bound  by  it, 
except,  it  is  said,  if  the  maker  use  words  that  in  another  State  (Y.)  give 
negotiability,  though  not  in  his  own,  he  will  be  held  on  the  suit  of  D.  (to 
whom  the  note  was  indorsed  in  Y.)  in  the  courts  of  Y.,  though  not  in  the 
courts  of  his  own  State  perhaps.     Lodge  v.  Phelps,  1  Johns.  Cas.  139. 

Days  of  grace  are  allowed  according  to  the  law  of  the  place 
of  payment.     Pomeroy  v.  Ainsworth,  22  Barb.  118. 

That  demand  and  protest  are  governed  by  the  law  of  the  place  of  pay- 
ment the  authorities  are  agreed,  and  the  better  opinion  is  that  pgn^^nd 
notice  is  equally  controlled  thereby.  The  nature  and  extent  Protest. 
of  the  liability  of  the  drawer  or  indorser,  when  once  fixed,  are 
settled  by  the  law  of  his  own  obligation;  but  the  Jixinff  of  his  liability  is 
another  thing,  that  should  be  controlled  by  the  law  of  the  place  of  pay- 
ment by  acceptor  or  maker,  since  it  is  only  by  such  conduct  toward  the 
maker  or  acceptor  as  is  required  by  the  latter  law  that  said  liability  can 
be  fixed ;  and  though  notice  is  not  a  part  of  the  conduct  toward  maker  or 
acceptor,  it  is  an  act  done  in  that  place,  and  the  principle  locus  regit  actus, 
and  the  security  and  convenience  of  business,  require  that  it  should  be 
placed  in  the  same  class.  It  would  be  very  confusing  to  have  to  conform 
to  the  law  of  four  or  five  different  countries,  in  which  successive  indorse- 
ments may  have  been  made,  in  order  to  charge  all  the  indorsers.  There 
are,  however,  authorities  that  hold  the  notice  to  drawer  or  indorser  must 
conform  to  the  law  of  the  place  where  the  drawing  or  indorsement  oc- 
curred. See  Daniell  on  Neg.  Inst.,  §  910.  When  the  liability  of  an 
indorser  is  once  fixed,  the  notice  he  must  give  to  his  indorser  is  of  course 
governed  by  the  law  of  their  special  contract.  J^ational  Bank  of  ^lichi- 
gan  V.  Green,  33  Iowa,  140. 

"  Wharton,  §§  405,  426. 

41 


§  12  PRELIMINARY. 

Where  there  are  two  laws  which  might  be  applied,  as,  for 
example,  in  case  of  interest,i^  that  most  favorable  to  the 
contract  should  govern ;  and  if  the  interest  is  proper  in  the 
place  where  the  money  is  used,  that  should  justify  it,  for  that 
is  the  real  place  of  performance  as  to  the  risks  incurred, 
which  arc  the  basis  of  interest. 

When  a  person  is  casually  out  of  his  domicil  and  con- 
tracts, if  the  circumstances  point  to  a  performance  where 
made.  State  C,  as  in  case  of  hotel  bills  and  Avatering-place 
debts,  or  bargains  in  general  with  the  natives,  that  law 
governs ;  but  if  both  parties  are  casually  ^^  in  C,  perhaps 
only  for  the  purpose  of  negotiation,  it  may  be  more  reasona- 
ble to  regard  the  domicil  of  the  debtor  as  the  place  of  per- 
formance ;  e.  g.  where,  in  Tennessee,  Georgia  parties  give 
or  indorse  a  note  payable  in  future  to  New  York  parties 
without  naming  a  place  of  payment,  Georgia  is  the  seat  of 
contract. 

^5  When  no  rate  is  specified,  the  place  of  payment  decides  the  inter- 
est. The  acceptor  pays  interest  according  to  the  law  of  the  place  of 
acceptance,  and  the  drawer  or  indorser  according  to  the  law  of  his  own 
contract.  2  Parsons,  N.  &  B.  376 ;  Gibbs  v.  Tremont,  20  E.  L.  &  Eq.  555; 
Smith  V.  Smith,  2  Johns.  235.  If  a  rate  is  named,  it  is  valid  if  the  law 
either  ^  of  the  place  of  payment  or  of  making  the  contract  allows  such 
rate;  and  some  cases "^  hold  that,  if  allowed  by  the  law  of  the  place  where 
the  money  is  to  be  used  and  the  risk  incurred,  it  is  valid,  for  the  place 
of  payment  or  making  may  be  determined  merely  by  convenience,  and 
have  no  relation  to  the  real  value  of  the  money  at  the  place  where  it  is 
invested.  (^  Peck  ;;.  Mayo,  14  Vt.  33;  l)e  Peau  r.  Humphreys,  20  :\Iart. 
La.  1;  Potter  v.  Tallman,  35  Barb.  182.  2  Young  v.  Godbe,  15  Wall. 
562;  Wharton,  §  508,  and  cases  cited.)  It  is  hard  that  money  lent  to  be 
used  in  New  Mexico  (where  interest  is  constantly  24%,  showing  the  value 
of  money  there  and  the  risk)  should  legally  bear  no  more  than  0%,  be- 
cause payable  in  some  Eastern  State. 

1^  In  Vanzant  v.  Arnold,  31  Ga.  210,  the  plaintiffs  resided  in  New 
York,  the  makers  and  indorsers  in  Georgia,  and  the  indorsement  and 
delivery  were  in  Tennessee,  to  the  plaintiff's  agents.  Tlie  court  said  it  was 
known  the  indorsers  resided  in  Georgia,  and  were  only  in  Tennessee  to 
negotiate,  and  the  parties  must  be  deemed  to  have  contemplated  Georgia 
as  the  place  of  performance.  But  if  the  transaction  in  Tennessee,  were 
between  a  Georgian  and  a  native  or  resident  of  Tennessee,  it  would  be 
very  likely  a  Tennessee  contract.  See  Story,  Confl.,  §  274. 
42 


PLACE   OF   PERFORMANCE.  §  12 

When  the  jilacc  of  performance  is  not  otherwise  determina- 
ble, it  is  deemed  that  the  })lace  where  the  contract  was  made  ^" 
was  so  intended,  and  it  is  not  the  place  of  dating,  writing,  or 
signing,  but  the  place  of  delivery,  where  the  bargain  is  con- 
summated, that  constitutes  the  place  of  making,  except  ^^  as 
to  hona  fide  purchasers  of  negotiable  paper,  for  value,  with- 
out notice  that  it  was  not  delivered  where  dated  ;  as  to  them, 
the  law  to  which  the  paper  purports  on  its  face  to  be  subject 
governs. 

"  When  a  note  is  payable  generally,  evidence  that  it  was  agreed  to  be 
paid  in  a  particular  place  is  inadmissible;  the  law  makes  it  payable  where 
made.     Frazier  v.  AV'arfield,  9  Sm.  &  M.  220. 

18  A  note  drawn  and  dated  in  Maryland,  but  delivered  in  New  York  iu 
payment  of  goods  purchased  there,  is  payable  in  New  York  and  governed 
by  its  laws.  Cook  v.  Moffat,  5  How.  295.  The  place  of  delivery  from 
maker  or  drawer  to  payee,  or  from  indorser  to  indorsee,  is  the  contract 
seat,  except  as  against  bonajide  purchasers  for  value,  in  the  usual  course 
of  business,  and  without  notice  that  the  place  of  dating  and  drawing 
does  not  truly  represent  the  place  of  delivery.  In  Lennig  v.  Ralston, 
23  Pa.  St.  1;39,  the  bill  bore  the  dress  of  a  Pennsylvania  bill,  though 
really  issued  in  London.  The  court  said  :  "  Upon  the  principle  that 
every  one  is  presumed  to  produce  all  the  consequences  to  which  his  acts 
naturally  and  necessarily  tend,  the  presumption  is  the  defendants  intended 
the  purchasers  of  it  should  receive  it  under  the  belief  that  it  was  a  bill 
drawn  in  Philadelphia  in  the  usual  course  of  business." 

As  against  a  hona  fide  purchaser  before  maturity,  without  notice,  the 
paper  cannot  be  shown  by  parol  to  be  other  than  what  it  claims  on  its 
face  to  be.  So  against  such  an  indorsee  (B.),  the  maker  or  indorser  can- 
not show  that  a  note  dated  in  ^Massachusetts,  and  indorsed  there  to  B.,  was 
really  made  in  New  York,  and  was  void  by  New  York  law.  Towne  v. 
Rice,  122  Mass.  67. 

43 


PART   I. 
BANKS  AND  BANKING  IN   GENERAL. 


CHAPTER   II. 

ORGANIZATION   AND   LOCATION. 

§  12  A.   Analysis. 
§  13.   Who  .may  be  a  Banker. 
Common  Law. 
Restraining  Acts. 
Purpose. 

Apply  to  continuous  functions,  not  to  isolated  acts. 
For  violation  of  these  statutes  there  is  no  remedy  but  the  one 
they  provide. 
§  14.   Organization. 

By  Charter.     §  6,  n.  1,  3,  4;  §  98/;  §§  743,  744,  750,  171;. 
Under  General  Law. 

Number  of  members. 
Amount  of  capital.     II.  §§  7,  14,  81. 
Mode  of  paying  it  in. 

Certificate  of  organization  acknowledged  and  recorded.    II.  §§  0, 
106  a  ;  II.  §§  12-15,  102. 
(a)  Existence  of  the  Bank.     §  765. 
Evidence  of. 

Judicial  Notice  of  the  Charter. 
§  15.   Ancillary  Powers  of  a  Bank. 
To  sue  and  be  sued. 
To  have  a  corporate  seal. 
To  have  perpetual  succession. 
To  appoint  and  qualify  officers. 
To  make  by-laws. 
To  increase  or  reduce  the  capital. 

§  IG.    ArrOlNTMENT    AND    QUALIFICATIONS   OF   OFFICERS.      IL  §§  9,  10. 

Directors,  how  elected. 

qualifications  of. 
President. 
Cashier. 
Clerks. 

Term  of  OflSce. 
Bond. 
4-4 


THE    RIGHT    TO    DO    BANKING.  §  13 

§  13.  Who  may  be  a  Banker?  —  Any  onc,  at  common  law. 
Banking  statutes  may  or  may  not  restrict  individuals  in  tliis 
matter,  to  protect  the  public  from  fraud  and  incompetency  ; 
but  the  restriction,  when  it  exists,  applies  to  a  continuous 
exercise  of  one  or  more  of  the  functions  of  banking,  and  not 
to  isolated  acts.  And  no  remedy  but  that  provided  in  the 
statutes  exists  for  their  violation. 

At  common  law,  the  right  of  banking  pertains  equally  to 
every  member  of  the  community.  Its  free  exercise  can  be  re- 
stricted only  by  legislative  enactment ;  but  that  it  legally  can 
be  thus  restricted  has  never  been  questioned.  After  laws  upon 
the  su!)ject  have  been  passed,  the  business  must  be  undertaken 
and  conducted  in  strict  accordance  with  all  the  provisions  con- 
tained in  them.  It  is  not  in  its  nature  a  corporate  franchise, 
though  it  may  be  made  such  by  legislation,  and  individuals 
may  be  prohibited  from  transacting  it,  either  altogether  in  all 
its  departments,  or  partially  in  any  specified  ones.  A  law 
which  forbids  the  carrying  on  of  "  any  kind  of  banking  busi- 
ness" is  a  total  prohibition  against  each  particular  department 
of  the  business,  though  conducted  singly,  and  may  be  infringed 
equally  by  exercising  any  separate  one  of  the  various  banking 
functions  as  by  exercising  all.^ 

But  the  restraining  statutes,  being  really  in  derogation  of 
common  law  rights,  will  always  be  interpreted  with  reasonable 
liberality  in  favor  of  the  supposed  infringer ;  and  when  they 
are  penal  in  their  character,  they  will  be  construed  with  con- 
siderable strictness  in  his  favor.  Isolated  acts  do  not  consti- 
tute an  infringement.  Thus,  discounting  notes  is  isolated 
one  of  the  most  important  of  banking  functions,  "'^^*" 
and  the  one  which,  next  to  the  utterance  of  bills  for  circula- 
tion, is  of  most  interest  to  the  public,  and  has  therefore  been 
most  frequently  and  most  carefully  regulated  hj  statute.  But 
any  person  may  occasionally  discount  a  note  for  another 
witliout  coming  within  the  legislative  prohibition.     If  he  is 

1  §  13.  Curtis  V.  Leavitt,  15  N.  Y.  9  (p.  52)  :  Attorney-General  v. 
Utica  Ins.  Co  ,  2  Johns.  Ch.  371;  The  People  v.  Same,  15  Johns.  358; 
Svme  V.  Bartow,  fi  Cow.  290;  Nance  v.  Hemphill,  1  Ala.  551;  State  v. 
Williams,  8  Tex.  255. 

45 


§  13  ORGANIZATION    AND   LOCATION, 

simply  dealing  Avith  his  own  funds,  he  is  not  properly  en- 
croaching upon  the  business  of  banks  in  the  same  department. 
For,  in  order  to  bring  discounting  within  the  proper  definition 
of  a  banking  function,  it  must  be  done  with  money,  in  part  at 
least  that  of  other  persons,  intrusted  to  or  deposited  with  the 
discounter,  so  that  he  has  the  practical  use  and  control  of  it 
for  these  purposes  as  fully  as  if  it  were  his  own.  Even  if  he 
does  use  the  money  of  others,  he  must  do  it,  not  on  compara- 
tively rare  occasions,  and  as  the  special  agent  of  each  one  of 
them  empowered  to  this  specific  end ;  but  with  some  degree 
of  frequency,  and  as  a  general  agent  having  control  of  the  com- 
bined or  intermingled  funds  of  several.^  In  New  York,  re- 
N.Y.  statutes  Straining  statutes,  penal  in  nature,  and  treating  in 
to' restrain'"^  tlicir  cxact  plirascology  only  of  "  associations  or 
individuals,  companies,"  have  been  declared  to  have  no  applica- 
tion to  individuals.  Any  single  person  may  enjoy  all  his  com- 
mon law  rights  unimpeded  by  them.^  But,  upon  the  other  hand, 
no  person  can  enjoy  any  of  the  powers  or  privileges  granted  or 
appurtenant  to  associations  or  companies,  even  though  for  the 
purpose  of  conducting  his  business  he  assumes  the  style  of  a 
cor[)oration.  He  may  furnish  all  the  capital,  may  control  all 
the  business,  may  be  practically  the  bank  itself,  yet  he  must 
go  through  all  the  forms  of  organization  prescribed  in  the  or- 
ganic banking  laws  of  the  country  or  State  before  he  can  be 
entitled  to  any  of  the  rights  which  inhere  in  corporations  only 
by  virtue  of  those  laws.^ 

The  purpose  of  restraining  acts  is,  of  course,  to  secure  the 
pu])lic  welfare  and  safety  from  the  inroads  of  incompetent 
men  and  swindlers.  But,  serious  as  is  the  evil  to  be  guarded 
against,  no  other  means  of  defence  against  it  appear  to  exist 
save  precisely  those  penalties  which  are  ])rovided  in  the  law 
itself  for  any  breach  of  the  law.     No  other  punishment  can  be 

2  Utica  Ins.  Co.  v.  Scott,  8  Cow.  70.0;  People  v.  Brewster,  4  Wend. 
498. 

8  Bristol  V.  Barker,  14  Johns.  205;  Codd  v.  Ratlibone.  19  N.  Y.  37. 
To  the  same  effect  is  also  the  law  in  Illinois.  Hunt  v.  Divine,  37  111. 
137. 

4  Hallett  V.  narrower,  33  Barb.  537 
46 


PROOF   OP   EXISTENCE.  §  14 

inflicted  than  that  laid  down  in  the  statute,  and  means  of  pre- 
vention can  be  sought  only  from  the  same  source.  Equity  will 
not  intervene  to  check  infringements,  and  even  systematic  con- 
duct of  the  banking  business,  in  direct  contravention  of  enacted 
law,  will  not  be  enjoined  on  the  ground  that  it  is  a  mischief  or 
a  nuisance  to  the  community.^ 

§  14.  Organization.  —  A  banking  Corporation  may  come  into 
existence,  either  under  a  special  act  of  incorporation,  called 
a  charter,!  or  under  a  general  law.  Tlie  latter  is  The  Rank's 
the  more  just,  giving  the  same  rights  to  all  per-  ^'■y^""=  ''^^^• 
sons  who  fulfil  the  conditions  as  to  number  ^  of  those  com- 
bining to  form  the  company,  amount  of  capital,^  manner  of 
paying  it  in,*  making  the  organization  certificate,^  and  having 
it  properly  acknowledged  and  recorded.*^ 

a.    The  Evidence  "  of  the  Bank's  Existence  is  the  organization 

^  Attorney- General  v.  Utica  Ins.  Co.,  2  Johns.  Ch.  371;  Same  v.  Bank 
of  Niac^ara,  1  Ilopk.  354. 

1  §  14.  The  New  York  Constitution,  art.  8,  §  4,  prohibits  any  special 
cliarter  for  banking  purposes.  See  New  York  Trust  &  Loan  Co.  v.  Hel- 
mer,  12  Hun,  35. 

*  In  Massachusetts,  ten  or  more.  P.  S.  673.  National  bank,  five  or 
more.     Part  II.  §  5. 

8  One  hundred  thousand  to  one  million  in  Massachusetts.  P.  S.  673. 
National  bank.     See  Part  II.  §  7. 

*  In  Massachusetts  one  half  must  be  in  the  bank  vaults  in  gold  and 
silver,  and  examined  by  three  commissioners,  before  the  bank  can  "^o  into 
operation,  and  a  majority  of  the  directors  must  take  oath  that  the  money 
was  paid  in  by  the  stockholders  towards  the  payment  of  their  respective 
shares,  and  not  for  any  other  purpose.  P.  S.  673.  National  bank. 
Part  II.  §  U. 

5  A  Massachusetts  certificate  must  state  the  corporate  name,  city  or 
town  of  location,  amount  and  number  of  shares  of  capital  stock,  name, 
residence,  and  .shares  of  each  stockholder,  and  the  time  the  bank  is  to  go 
into  operation.     P.  S.  673.     National  Bank.     See  II.  §  6. 

6  ^Massachusetts  certificate  must  be  acknowledged  before  a  justice, 
recorded  in  registry  of  deeds  for  county  or  district  of  bank's  location, 
and  a  copy  filed  in  office  of  the  State  secretary.  P.  S.  673.  National 
bank.     See  11.  §  6. 

''  P.  S.  673,  §  4;  II.  §  6.  In  New  York  corporate  existence  need  not 
be  proved  uiile.«s  denied  in  the  answer.  Code  Civ.  Prac.  §  1776.  The 
comptroller's  certificate,  under  Rev.  Sts.  §  5169,  is  conclusive  as  to  the 
regularity  of   the   proceedings   organizing  a   national   bank.     Casey  v. 

47 


§  15  ORGANIZATION    AND    LOCATION. 

certificate,  or  the  charter,  as  the  case  may  be.  The  former 
is  brought  before  the  court  by  certified  copy ;  the  latter  will 
in  some  States  be  judicial^/y  noticed  ;  **  in  others,  it  must  be 
pleaded  and  proved.^ 

§  15.  The  Ancillary  Powers  of  the,  Bank.  —  The  powers  of 
a  bank  may  bt^  convenieatly^  divided  into  powers  of  doing  busi- 
ness (see  §  44),  and  those  subservient  to  business,  or  ancillary 
powers.  The  latter  powers  or  rights  are,  to  have  perpetual 
succession  under  a  special  denomination,  and  artificial  form,  to 
sue  and  be  sued  in  the  corporate  name,  to  have  a  corporate 

Galli,  Q4  U.  S.  673;  Keyser  v.  Hitz,  2  Mackey,  513  (D.  C,  1883).  Such 
certificate  that  th^lwank  has  complied  with  the  law,  &c.,  and  was  author- 
ized totlo  bMliin^s,  and  proof  that  it  has  done  business  for  several  years, 
4s,,gopd  euidence  of  existence.  Mix  v.  National  Bank  of  Bloomington, 
91  I11.'20X187^8).^ 

8  Stribbling  v.  Bank,  5  Rand.  132;  Bank  of  Utica  v.  Magher,  18 
Johns.  3il;  Vance  r.  Bank,  1  Blackf.  80;  Towson  v.  Havre  de  Grace 
Bank,  6  Har.  &  J.  47;  Williams  v.  Union  Bank,  2  Humph.  339;  Hays  v. 
Northwestern  Bank,  9  Gratt.  127.  The  court  will  take  judicial  cogrf!- 
zance  of  the  expiration  of  a  bank  charter,  and  thereupon  dismiss  an 
action.  Terry  v.  Merchants  &  Planters'  Bank,  G6  Ga.  177.  The  West 
Virginia  courts  will  take  judicial  notice  of  the  Virginia  act  incorporating 
the  Northwestern  Bank  of  Virginia;  its  existence  being  pre.served  by  the 
W^est  Virginia  constitution  of  1863,  art.  11,  §  8,  and  of  1872,  art.  8,  §  36. 
Northwestern  Bank  of  Virginia  f.  INIachir,  18  W.  Va.  271  (1881). 

^  Agnew  V.  Bank  of  Gettysburg,  2  Har.  &  Gill,  478;  First  National- 
Bank  of  Clarion  v.  Gruber,  87  Pa.  St.  468.  In  the  latter  case  the  court 
refused  to  take  notice  of  the  charters  of  State  banks  as  authorizing  them 
to  charge  a  higher  rate  of  interest  than  the  ordinary  rate,  but  said  that  a 
bank  charter  is  a  private  act,  and  must  be  pleaded  and  proved  like  other 
private  acts,  and  the  national  bank  basing  its  claim  to  charge  a  certain 
rate  on  the  existence  of  said  charters  must  prove  them. 

Where  to  suit  by  a  corporation  the  general  issue  is  pleaded,  the  corpo- 
ration must  prove  its  legal  existence.  In  New  York  it  was  held  that 
even  the  Bank  of  the  United  States  was  not  entitled  to  be  excepted  from 
this  rule.  United  States  Bank  v.  Stearns,  15  Wend.  314.  But  this  re- 
quirement has  since  been  dispensed  with  in  New  Yoik  by  special  statute 
(2  R.  S.  458,  §  3).     Bank  of  Genesee  i'.  Patchin  Bank,  3  Kern.  309. 

Where  a  suit  to  recover  upon  worthless  bills,  which  have  been  issued 
by  a  banking  corporation,  is  brought  against  those  who  are  alleged  to 
have  been  the  officers  and  directors  of  the  corporation,  the  charter  must 
be  proved,  if  its  existence  is  necessary  to  make  the  bank  a  corporate 
body.  Gardner  v.  Post,  43  Pa.  St.  19. 
48 


OFFICERS.  §  16 

seal,  to  appoint  officers  and  agents  (§  16),  and  take  bonds 
for  their  good  behavior  (§  17),  and  to  make  by-laws  for  the 
government  of  its  affairs  and  the  conduct  of  its  members  and 
officers  (§  43). 

These  are  all  powers  inherent  at  common  law  in  every  cor- 
poration, but  are  usually  expressly  conferred  in  the  organic 
law  (see  II.  §  8). 

And  express  power  is  usually  given  in  the  organic  law  to 
increase  or  reduce  the  capital  stock  within  certain  limits, 
which  is  an  express  ancillary  power.^ 

§  16.    The   Appointment  and  Qualification  of  Officers  are  gen- 
erally provided  for  in  the  charter  ;  usually,  the  directors  ^  are 
chosen  annually  by  the  stockholders,  and  are  removable  by  a 
special  meeting  of  the  shareholders  for  that  purpose.     The  di- 
rectors must  have  certain  qualifications  ^  of  citizenship,  resi- 
dence, and  ownership  of  shares  in  the  bank.     Once  properly 
-    -    .-■    elected  they  hold  office  till  their  successors  are  elected,^  or 
»>    u    ■     until  they  are  disqualified,  or  they  or  the  corporation  die,  or 
z    2    7^  the  time  for  which  they  were  elected  expires, 
p    ^    <      The  directors  elect  one  of  their  number  president,  and  ap- 
S    >    ^  point  a  cashier,^  and  such  clerks,  tellers,  and  other  officers  as 
p    r   ^thcy  deem  proper  for  the  business  of  the  bank.*     The  term  of 
r    (   iTioffice  in  these  cases  may  be  fixed  by  the  organic  law,  or  the 

r 

1  §  15.  The  P.  S.  of  Mass.  (p.  674)  provide  for  increase  of  capital  by 
three-fourths  vote  of  stockholders.  For  increase  and  reduction  of  capi- 
tal of  national  banks  when  provided  for  in  articles  of  association  and 
approved  by  comptroller,  see  II.  §  13. 

1  §  16.  In  Massachusetts  seven  to  twelve  directors;  each  must  have  five 
shares  at  least,  be  a  citizen  of  Massachusetts  and  resident  there,  not  a 
director  in  any  otlier  bank,  and  a  majority  of  them  must  reside  or  have 
their  places  of  business  in  the  county  of  the  bank,  or  within  ten  miles  of 
the  bank.     P.  S.  675,  §  17,  18.     National  bank,  see  II.  §  9. 

2  Part  II.  §  10  settles  tlie  tenure  of  office  of  national  bank  directors: 
they  hold  for  one  year  plus  any  further  time  passing  before  their  succes- 
sors are  elected  and  qualified,  unless  sooner  disqualified,  removed,  &c. 

The  term  of  office  of  a  director  in  a  bank  organized  under  the  Massa- 
chusetts statutes  is  one  year.     P.  S.  675,  §  19. 

*  In  Massachusetts  the  cashier  cannot  be  a  director  of  the  bank  in 
•which  he  is  cashier.     P.  S.  676. 

*  These  officers  are  removable  by  the  appointing  power. 

VOL.  I.  4  49 


§  16  ORGANIZATION   AND   LOCATION. 

by-laws,  or  by  vote  of  the  corporate  government ;  but  unless 
Term  of  limited,  the  officer  holds  until  a  successor  is  elected, 
oiuce.  Qj,  Y\e  is  removed,  or  dies,  or  is  disqualified,  or  the 
bank  ceases  to  exist,  as,  for  example,  by  expiration  of  charter.-'' 
But  the  fact  that  the  directors  are  by  the  charter  to  be  annu- 
ally elected,  and  that  tliey  have  the  appointment  of  the  cashier, 
does  not  of  itself  make  the  office  of  cashier  annual,^  nor  does 
a  mere  habit  of  the  directors  to  re-elect  every  year  make  the 
office  an  annual  one,  so  as  to  expire  before  a  successor  is 
elected  and  qualified^  Of  course,  where  the  directors'  office 
is  annual  and  the  president  is  one  of  them,  his  office  also  is 
annual. 

Whether  required  ^  by  the  organic  law  or  not,  it  is  usual  to 
secure  the  bank  by  requiring  the  cashier  and  subordinate  offi- 
cers to   give  a  bond   for   the   faithful   discharge   of 
official  duty,  and  as  this  is  one  of  the  points  around 
which  the  cases  cluster,  we  will  devote  a  chapter  to  it. 

^  But  the  charter  period  may  expire,  and  yet  the  bank  not  cease  to 
exist ;  for  the  legislature  may  prolong  its  life,  and  then  the  tenure  of  office 
may  not  be  broken  by  arrival  of  the  limit  first  set.  Exeter  Bank  v. 
Rogers,  7  N.  H.  21.     See  §  27. 

«  Union  Bank  v.  Ridgely,  1  Har.  &  G.  413. 

'  Amherst  Bank  v.  Root,  2  Met.  522. 

8  P.  S.  676  require  a  bond  not  less  than  $20,000  of  the  cashier.  See 
11.  §  8. 

50 


§17 


CHAPTER  III. 

OFFICIAL  BONDS   AND   LIABILITIES   OF   SURETIES. 

§  16  A.  Analysis. 

§  17.  General  rule  and  difficulties  stated. 

§  18.  Defences,  analysis  of. 

§  19.  Form  and  requisites. 

§  20.  Delivery  and  acceptance. 

§  21.  Fraud  or  illegality  at  inception. 

§  22.  Do  not  cover  loss  by  act  of  other  than  the  officer,  as  by  theft. 

§  23.  Or  loss  by  innocent  mistakes. 

§  24.  Negligence  of  officer. 

§  25.  Exceeding  his  authority. 

§  20.  Unusual  duties  given  him.     See  §  17  a. 

§  27.  Period  covered  by  the  bond. 

§§  28-32.         Change  In  circumstances  affects  risk.     See  §  17  a. 

§§  33,  37-41.   Misconduct  and  negligence  of  bank  or  other  officers.     See  §  17  a. 

§  34.  Satisfaction  of  bank's  loss. 

§  35.  Statute  of  limitations. 

§  36.  Revocation  by  surety. 

f  Evidence. 

§  42.  "I  ileasure  of  damages. 

[  Pleading  and  practice. 

§  17,  n.  3.        Construction. 
In  general. 

§  24.  "  Well  and  faithfully,"  "  well  and  truly,"  to  discharge. 

§  24.  (Penn.)  "  Well  and  truly  to  perform  duties  to  best  of  his  abilities." 

§  23.  "  Deliver  to  his  successor  all  moneys,"  &c. 

§  26,  n.  0".  "  Perform  all  duties  of  office  which  the  directors  may  pre- 

scribe." 

§  25.  (Va. )  "Faithful  discharge  of  the  trust  reposed  in  (him)  as  assistant 

bookkeeper." 

§  41.  Express  stipulation  of  the  maximum  sum  to  be  intrusted  to 

clerk. 

§  17.  Bonds.  —  Powertotake.  —  Purpose.  —  Summary  of  Chap- 
ter.—  The  custom  of  requiring  bonds  from  the  various  officers 
may  probably  be  considered  as  universal  among  banking  insti- 
tutions. Usually  they  are  taken  only  from  the  executive  offi- 
cers ;  most  frequently  from  the  cashier  and  tellers,  sometimes 

51 


§  17  OFFICIAL   BONDS    AND    LIABILITIES   OF   SURETIES. 

from  the  bookkeepers ;  and  there  are  instances,  though  these 
are  comparatively  rare,  in  which  they  have  been  taken  even 
from  the  president  and  directors. 

The  power  to  take  official  bonds  is  inherent  in  every  corpo- 
ration independently  of  statute.^ 

The  purpose'^  of  the  bond  is  not  penalty,  but  indemnity 
against  loss  by  fault  of  the  officer,  in  the  transaction  of  the 
business  of  his  office,  or  by  reason  of  the  opportunities  it 
affords  him. 

The  questions  arising  on  the  execution,  delivery,  accept- 
ance, construction,^  and  revocation  ^  of  bonds,  and  in  relation 

1  §  17.  The  National  Banking  Act,  §  8,  declares  that  the  association 
"  may  elect  or  appoint  directors,  and  by  its  board  of  directors  apj^oint  a 
president,  vice-president,  cashier,  and  other  officers,  define  their  duties, 
require  bonds  of  them,  and  fix  the  penalty  thereof,"  &c.  It  is  evident 
that  this  gives  no  right  to  the  association  to  require  bonds  of  a  director, 
at  least  unless  he  shall  also  fill  some  other  office.  But  this  does  not 
render  the  taking  of  a  bond  from  a  director  illegal ;  nor  does  it  prevent 
such  a  bond  from  being  valid  at  common  law.  It  only  deprives  the  bond 
of  a  statutory  character,  which  is  an  insignificant  loss,  inasmuch  as  it 
seems  to  be  attended  by  no  very  definite  practical  advantage.  The 
power  to  take  official  bonds  is  inherent  in  every  corporation,  indepen- 
dently of  statutory  permission ;  and  the  permission  or  the  command  to 
take  them  from  any  particular  officers  cannot  be  construed  to  preclude 
the  power  of  taking  them  from  others  also.  Bank  of  Northern  Liberties 
V.  Cresson,  12  Serg.  &  R.  306. 

It  is  clear  also  that  a  bond  may  be  void  as  a  statutory  bond,  by  reason 
of  variance  from  the  requirements  of  the  statute  under  which  it  purports 
to  be  drawn,  and  yet  be  valid  as  a  common  law  bond.     See  §  19. 

2  See  measure  of  damages,  §  42. 

8  Most  of  the  matters  treated  in  this  chapter  are  questions  of  construc- 
tion. Where  the  bond  is  inartificially  and  clumsily  drawn,  so  that  the 
careless  collocation  of  inconsistent  words  would  lead  to  absurdities  if  a 
literal  construction  were  attempted,  the  court  will  revise  and  correct  the 
language  so  as  to  render  it  conformable  to  reason.  Planters  &  Mer- 
chants' Bank  v.  Hill,  1  Stew.  201. 

The  phraseology  of  the  bond,  upon  which  the  litigation  in  the  cited 
case  arose,  furnishes  a  fair  example  of  the  method  of  application  of  this 
rule.  The  condition  of  the  bond  was  that  the  cashier  should  "  with 
fidelity,  punctuality,  and  attention,  to  the  best  of  his  skill,  judgment, 
and  ability,  conduct  himself  in  said  office  well  and  truly,  discharging  all 
its  duties,  executing  the  orders  of  the  directors  of  said  bank,  safely  and 

62 


GENERAL   RULE   AS   TO    SURETY'S   LIABILITV.  §  17 

to  the  discharge  of  sureties  by  fraud,  or  misconduct  of  the 
bank,  or  officers  other  than  the  one  guaranteed,  can  be  very 
conveniently  grouped  under  the  various  defences  a  surety 
may  make,  adding  in  our  notes  a  few  points  in  reference  to 
evidence,  measure  of  damages,  and  pleading  and  practice  in 
general. 

a.  Liability  of  a  Surety.  —  Express  words  may  insure  against 
even  innocent  mistake  or  accident. 

But  in  the  case  of  an  ordinary  bond  for  the  faithful  dis- 
charge of  the  duties  of  a  certain  office,  C,  by  a  certain  person, 
0.,  the  surety  is  liable  for  all  loss  caused  by  the   „  .    .  , 

'  •'  _  •'  Principle 

dishonest  or  incompetent  ^  (unless  this  is  excluded  by   stated,  and 

*■      the  chief 

the  language  of  the  bond)  conduct  of  0.  in  the  sphere  difficulties 
of  said  office  (including  such  slight  variations  ^  and 
temporary  substitutions  as  are  likely  to  occur  in  the  ordinary 
course  of  business),  or  by  his  taking  advantage  of  the  opportu- 
nities'' of  his  employment  in  such  office  to  commit  a  criminal  or 
tortious  act,  during  the  time^  he  lawfully  holds  such  office 
under  the  election  to  which  the  bond  relates. 

But  difficult  questions  arise.     Suppose  the  directors^  order 

securely  keeping  all  moneys  deposited  in  his  hands,"  and  doing  a  great 
multiplicity  of  other  "duties,  acts,  and  things,"  "all  and  singularly," 
according  to  the  descriptions  contained  in  several  more  adjectives  and 
adverbs.  The  writer  of  the  bond  was  evidently  floundering  in  a  sea  of 
words,  and  the  court  was  obliged  to  come  gallantly  to  the  rescue.  They 
declared  that  it  was  evident,  from  the  very  nature  of  the  language,  that 
it  was  not  intended  to  apply  all  the  restrictions  to  each  particular  duty; 
but  that  an  intelligent  apportionment  should  be  made  of  the  various 
expressions  among  the  divers  "duties,  acts,  or  things  "  respectively,  as 
from  their  several  natures  they  might  he  susceptible  of  the  qualifications 
mentioned.  Thus  "  punctuality  "  could  hardly  be  called  for  in  "keep- 
ing," but  leather  in  "accounting  for"  or  "paying  over  "money.  On 
the  other  hand,  "  judgment  and  ability  "  might  be  required  in  "  keeping," 
and  "skill"  in  "  accounting,"  but  neither  of  these  qualities  could  be  of 
much  assistance  in  the  business  of  "paying  over."  The  surety  will 
never  be  held  to  guarantee  the  performance  of  the  duties  of  a  public  office 
in  a  manner  either  absurd  or  impossible,  simply  because  an  awkwardly 
phrased  bond  would  subject  him  to  this  obligation  if  an  effort  were  made 
to  construe  it  strictly  according  to  its  wording. 

*  See  §  36.  '  ^  §  04.  e  s  20. 

M  25.  .        *  §  27.  9  §§  37,  33. 

53 


§  17  OFFICIAL    HONDS    AND   LIABILITIES   OF    SURETIES. 

0.  to  do  a  wrongful  act,  from  wliicli  loss  results  to  the  bank, 
or  by  their  negligence  or  connivance  give  him  the  opportunity 
for  wrong,  is  the  surety  discharged  ?  It  may  be  said  the  bank 
intrusts  its  business  to  the  directors,  and  their  acts  bind  it, 
and  others  prejudiced  by  their  conduct  are  not  to  be  hold  by 
the  bank.  Tlie  answer  is,  that  the  directors  arc  not  intrusted 
to  do  wrong,  and  that  the  surety  does  not  have  to  bear  loss 
caused  by  them  but  by  0.,  whom  he  has  guaranteed,  and  the 
fault  of  any  other  oflicer  cannot^"  make  O.'s  wrong  less  a 
breach  of  his  bond.  If  the  stockholders  themselves  are  guilty  of 
wrong,  that  would  be  a  different  question  ;  they  are  the  real 
principal^*  on  the  bond,  and  such  conduct  would  be  a  fraud 
on  the  surety  that  ought  to  discharge  him. 

Suppose  again  that  O.'s  salary  is  increased  or  diminished, 
or  the  bank's  capital  is  raised,  or  0.  is  given  duties  outside 
the  sphere  contemplated  in  the  bond  as  above.  How  shall 
these  things  affect  the  obligation  ? 

On  principle  it  would  seem  clear,  1st,  that  if  the  loss  is 
caused  by  the  employment  of  0.  out  of  his  sphere,  the  surety 

^"  A  bond  would  be  of  little  value  were  the  law  otherwise.  Sup- 
pose M.  emploj's  A.  as  a  manager  and  B.  as  cashier,  and  D.  is  surety  for 
both.  If  either  A.  or  B.  makes  default,  he  is  liable  to  M. ;  but  if  A.'s 
fault,  giving  B.  opportunity  for  wrong,  is  to  relieve  the  surety,  then  he 
is  liable  only  on  one  bond,  though  both  are  broken.  If  B.  defaults,  S. 
is  liable;  if  A.  defaults,  S.  is  liable;  but  if  they  put  their  heads  together 
he  is  only  liable  for  one  of  them.  Or,  if  D.  insures  B.,  and  C.  insures  A., 
in  case  of  fault  of  A.  giving  B.  his  opportunity,  only  C.  would  be  liable. 
This  seems  a  good  deal  like  saying  two  wrongs  together  against  the  same 
person  make  one  of  them  right. 

Again,  suppose  the  manager  comes  to  know  the  cashier  is  stealing,  and 
he  buys  silence.  Can  the  cashier,  the  principal  on  his  own  bond,  take 
advantage  of  his  own  wrong  to  deny  his  liability  on  the  bond  to  M.  ? 
And  if  the  principal  is  liable  on  the  bond,  is  not  the  surety? 

As  to  thii-d  persons  generally,  who  are  injured  by  the  negligence  or 
misconduct  of  the  directors  in  the  business  intrusted  to  them,  the  bank 
is  liable ;  but  when  a  person  has  made  an  express  contract,  the  very  pur- 
pose and  nature  of  which  is  inconsistent  with  the  idea  of  holding  the 
bank  to  such  responsibility,  the  case  fronts  about. 

^''    Any  fraud  or  improper   conduct   of   the  creditor  or  obligee  will 
discharge  the  surety.     Ham  v.  Greve,  34  Ind.   19;    Franklin   Bank   v. 
Cooper,  36  Me.  179. 
54 


INCREASE   OF   RISK.  §  17 

is  not  liable,  and  to  this  the  cases  agn-cc ;  ^'^   2(J,  that  if  it 
can  be  clearlv  shown  that  the  extra  duties  had  noth-   ^ , 

"^  Change  of 

ing  to  do  with  the  loss,  but  that  it  was  caused  by   otiiiers' 
O.'s  conduct  in  the  sphere  of  the  office  C,  or  by  a 
wrongful   advantage   of  the   opportunities   afforded   by   that 
office,  the  surety  should  be  held,  for  it  is  a  loss  within  the 
bond   (unless  of  course  there  is  an  express   provision  that 
extra  duties  shall  avoid  the  contract). 

To  this  second  proposition  the  cases  do  not  assent^''  if 
the  duties  are  of  a  higher  grade  (i.  e.  require  more  skill,  or 
put  the  oHicer  under  greater  temptation)  than  those  of  the 
bonded  office.  In  such  cases  the  increase  of  risk  avoids  the 
bond.  The  surety  has  a  right  to  judge  of  the  circumstances 
under  which  he  is  willing  to  be  liable,  and  any  change  of  the 
risk  without  his  consent  discharges  him,  unless  unsubstantial 
or  clearly  for  his  benefit. 

It  may,  however,  be  strongly  urged  that  justice  only  requires 
that  the  burden  of  proof  should  be  thrown  upon  the  bank  in 
such  cases  to  show  clearly  that  the  loss  was  not  in  conse- 
quence of  the  change.  In  most  cases  the  two  rules  would 
produce  identical  results,  as  it  would  usually  be  impossible 
to  disentangle  the  influences  producing  the  officer's  default, 
and  on  the  broad  consideration  of  practicality  the  rule  of  law 
is  })erhaps  the  best,  as  preventing  troublesome  inquiry  in  favor 
of  one  who  has  by  his  own  act  put  a  cloud  upon  his  rights. 
The  analogy  of  goods  mingled  by  negligence  or  wilful  act  is 
against  the  rule  of  law  here,  for  the  owner  can  claim  the 
goods  if  he  can  clearly  distinguish  them. 

The  ground  for  holding  the  surety  discharged  is,  that  the 
cause  of  loss  may  be  conduct  outside  the  bond,  and  if  this 
can  be  successfully  rebutted  the  ground  fails.  Nor  does  the 
rule  of  law  seem  necessary  to  prcA-ent  fraud,  for  the  burden  of 
proof  would  do  that  as  well  ;  however,  as  the  law  is  well  set- 
tled and  known,  it  can  work  little  injustice. 

It  might  be  urged  that,  as  the  fault  of  directors  cannot  dis- 
charge the  surety,  the  addition  of  higher  duties  by  the  direc- 
tors should  not ;  but  the  reason  of  release  of  the  surety  is  that 

10  §§  30,  2G. 

55 


§  18  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

the  cause  of  loss  may  be  outside  the  bond,  and  this  reason  is 
not  touched  by  any  consideration  of  the  manner  in  whicli  0. 
came  to  act  beyond  the  ofhce  C. 

As  to  the  increase  of  capital,"  the  arguments  are  about 
balanced  as  to  whether  it  is  an  enlargement  of  risk 

Increase  of  .  ° 

capital  or  fairly  to  be  presumed  within  the  contemplation  of 
the  bond,  or  not. 

But  the  diminution  or  increase  of  salary  ^^  is  so  ordinary  a 
matter,  so  naturally  to  be  expected,  and  of  so  little  impor- 
tance to  the  risk,  as  to  seem  clearly  of  no  effect,  though  it  has 
been  held  otherwise. 

§  18.    Defences. 

(a)  That  the  bond  never  took  effect. 

(1)  Formal  requisites  absent.     §  19. 

(2)  No  delivery  and  acceptance.     §  20. 

(3)  Fraud  or  illegality  in  its  inception.     §  21. 

(b)  That  the  loss  is  not  of  a  nature  covered  by  the  bond. 

(1)  Loss  by  theft,  robbery,  unavoidable  accident, 

or  other  cause  not  involving  fault  of  the 
officer  (0.)  guaranteed.     §  22. 

(2)  Loss  by  innocent  mistake  of  0.     §  23. 

(3)  Loss  by  conduct  of  0.,  below  the  line  of  ordi- 

nary skill,  competency,  and  care.     §  24. 

(4)  Loss  by  act  of  0.  in  excess  of  his  authority. 

§  25. 

(5)  Loss  by  0.  in  performing  extra  and  unusual 

duties,  or  such  as  do  not  pertain  to  the 
sphere  in  which  he  was  guaranteed.    §  26. 

(c)  That  there  was  no  act  of  0.  of  a  nature  to  create  lia- 

bility of  the  sureties  occurring  within  the  period 
covered  by  the  bond.     §  27. 

(d)  Discharge  of  the  surety. 

(1)  By  a  material  change  not  contemplated  in 
the  contract,  as  changes  in  the  banking 
firm,  in  the  duties  of  the  officer,  increase 
of  capital  stock  or  of  the  officer's  salary. 
§§  28-32. 

11  §  32.  12  §  31. 

56 


FORM   OF   BOND.  §  10 

(2)  Misconduct  of  bank  in  keeping  0.  after  dis- 

covery of  his  dishonesty.     §  o3. 

(3)  Satisfaction  of  the  bank's  loss.     §  34. 

(4)  Statute  of  limitations.     §  35. 

(c)  Revocation  previous  to  the  wrongful  act  of  0.     §  30. 
No  Defence. 

(a)  That  the  dishonest,  improper,  or  irregular  act  of  0. 

was    done    under   authority   from    the   directors. 
§  37. 

(b)  Nor  that  the  bank  was  negligent  in  not  discovering 

previous  defalcations  of  0.     §  38. 

(c)  Nor  that  the  signature  of  another  surety  was  fraudu- 

lently obtained.     §  21. 

(d)  Nor  that  a  greater  sum  was  intrusted  to  0.  than  the 

limit  set  in  the  bond.     §  41. 
(c)  Nor  that  the  bank  has  failed  to  perform  public  duties, 

or  done  business  contrary  to  its  charter.     §  39. 
(f)  Nor  that  the  officer  failed  to  take  the  oath  required 
by  statute.     §  40. 
§  19.   Form  1  of  the   Bond.  —  The  National    Banking   law 
(II.   §  8)  does  not  specify  the  terms  of  the  bond,  and  the 
State  statutes  ^  generally  have  few  provisions  on  the  subject. 
As  a  rule,  any  condition  in  the  bond,  consistent  with  its  char- 
acter as  a  guaranty  that  the  officer  shall  perform  his  contract, 

1  §  19.  A  bond  running  to  the  president  and  directors,  without  addi- 
tion of  the  corporate  name,  will  be  regarded  as  a  valid  bond    Bond  in 

to   the   corporation,    and   may  be   sued  by  the   corporation,    officers. 
Pendleton  c.  Bank  of  Kentucky,  1  T.  B.  Mour.  171. 

If  after  an  official  bond  is  duly  signed,  executed,  and  delivered  to  the 
proper  officer  by  the  principal  and  the  sureties,  it  is  found  that  the 
blanks  in  the   body  of  the  instrument,  which  were  left  for    Blanks 
the  names  of  the  sureties,  have  been  accidentally  left  unfilled,    "°fi"«J- 
the  bank  lias  authority  to  insert  the  names.     Hultz  v.  Commonwealth, 
3  Grant,  Ul. 

Where  the   date  of  the  bond  is  "the  day  of  ,  1SG9,"  the 

legal  presum{)tion   is  that  it  took  effect  on  the  last  day  of 
that  year.     Graves  v.  Lebanon  National  Bank,  10  Bush,  23. 

2  In  Massachusetts  the  cashier's  bond  is  to  be  "conditioned  for  the 
faithful  performance  of  his  duties,"  and  in  no  case  for  less  than  twenty 
thousand  dollars.     P.  S.  676,  §  27. 

57 


§  19  OFFICIAL    BONDS    AND    LIABILITIES   OF   SURETIES. 

and  not  in  contravention  of  law,  morals,  or  public  policy,  will 
be  sustained. 

When  there  are  statutory  provisions  to  which  the  hand  fails 
to  conform,  it  may  still  be  good  as  a  common  laiv  bond,  unless 
Statutory  ^^^^  legislature  has  declared  that  bonds  not  in  aecord- 
bond.  ^^^g  ivith  the  statute  shall  he  void? 

Although  both  in  its  form  and  in  its  execution  it  should 
differ  very  materially  from  the  special  regulations  prescribed 
in  the  charter  or  statute  in  accordance  with  which  it  purports 
to  be  drawn  and  executed,  nevertheless,  as  a  contract  volunta- 
rily entered  into,  upon  sufficient  consideration  and  for  a  per- 
fectly legal  purpose,  it  remains  obligatory  upon  the  parties, 
independently  of  the  statute.  Where  the  bond  differs  from 
the  statutory  form  only  in  setting  forth  a  greater  number  of 
requisitions  to  be  complied  with  by  the  officer,  if  they  are  sev- 
erable, those  of  them  which  are  not  called  for  by  the  statute 
may  be  rejected  as  surplusage.'*  This  would  render  the  bond 
good  under  the  statute,  but  nothing  would  be  practically 
gained  by  it.  For  without  the  severance  and  rejection  the 
bond  would  still  have  been  good  in  its  original  shape  at  com- 
mon law.  The  operation  of  this  latter  doctrine  can  be  pre- 
vented only  by  the  express  legislative  enactment  that  a  bond 
taken  in  any  other  form  shall  be  void.  No  less  positive  lan- 
guage can  be  substituted  for  this  explicit  declaration  with  the 
like  effect.  The  words  used  may  amount  to  a  prohibition 
against  the  officer's  entering  upon  the  discharge  of  his  office 
until  he  has  given  such  a  bond.  Still  the  bond  in  the  differ- 
ent shape  will  remain  good.  It  was  urged  in  the  Brighton 
Bank  case,  cited  in  note  3,  that  the  bank  could  not  recover 
because  it  could  not  make  out  its  case  except  by  proving  and 

8  Bank  of  Bi-ighton  ?'.  Smith,  5  Allen,  413;  Bank  of  Northern  Liber- 
ties  V.  Cresson,  12  Serg.  &  R.  300;  Franklin  Bank  v.  Cooper,  3G  Me.  179; 
Gathwright  v.  Callaway  County,  10  Mo.  663;  The  Governor  v.  Allen, 
8  Humph.  176;  State  Bank  v.  Locke,  4  Dev.  529;  Bank  of  Carlyle  v. 
Hopkins,  1  Monr.  245;  Morse  r.  Hodsdon,  5  Mass.  314;  Burroughs  v. 
Lowder,  8  id.  373;  Sweetser  v.  Hay,  2  Gray,  49;  Grocers'  Bank  r.  King- 
man, IG  Gray,  473. 

4  Shunk  V.  Miller,  5  Barr,  250;  AValker  v.  Chapman,  22  Ala.  116; 
Woods  V.  State,  10  .AIo.  698. 
58 


PAROL   EVIDENCE   OF   ACCEPTANCE.  §  20 

relying  upon  an  illegal  act.  But  tlio  nourt  very  clearly  showed 
the  fallacy  of  this  argument,  even  if  it  were  assumed  that  the 
statute  was  to  be  construed  as  a  prohibition  on  the  bank  direc- 
tors, restraining  them  from  permitting  the  cashier  to  act  as 
such  till  he  had  given  the  prescribed  bond.  Still,  the  bank 
proved  no  illegal  act  or  omission  to  support  their  case.  In 
the  taking  of  the  bond  in  question  there  was  no  violation  of 
law.  The  only  possible  fault  lay  in  the  omission  to  take  an- 
other bond.  But  the  omission  to  do  something  else  did  not 
necessarily  vitiate  that  which  was  done.  The  bond  taken  was 
not  prohibited  by  statute ;  both  might  have  been  legally  taken, 
and  both  or  either  must  be  valid. 

§  20.  Delivery  and  Acceptance.  At  common  law  no  vote 
or  record  of  acceptance  is  necessary ;  parol  evidence  of  any 
circumstances  that  would  raise  a  presumption  of  acceptance 
in  the  case  of  an  individual  is  sufficient ;  but  statutes  or  char- 
ter may  require  the  bond  to  be  "  approved  "  or  "  accepted  " 
by  the  directors,  or  "  by  vote  of  the  directors,"  or  that  it  shall 
be  "  to  the  satisfaction  of  the  directors."  In  all  cases  parol 
will  be  admitted  to  prove  circumstances  from  which  the  re- 
quired approval  can  be  inferred ;  mere  possession  by  the  bank 
of  a  paper  like  this,  intended  for  their  benefit,  is  good  evidence 
of  acceptance.  When  directors  are  themselves  sureties,  see 
§  21  a. 

The  form  of  the  bond  and  the  sufficiency  of  the  sureties 
offered  upon  it  ought  of  course  to  be  considered  and  passed 
upon  by  the  responsible  government.  But  where  an  express 
legislative  command  is  laid  upon  them  to  do  so,  it  has  occa- 
sionally been  set  up  in  defence  to  suits  upon  bonds,  either  that 
the  directors  had  not  "  accepted  "  at  all,  or  had  not  accepted 
"  by  vote  "  ;  or  that  there  is  no  proper  and  admissible  evi- 
dence of  their  having  done  so.  This  ground  was  first  taken 
in  the  case  of  the  Bank  of  the  United  States  v.  Dandridge.^  At 

the  trial  of  that  cause  the  plaintiffs  undertook  to 

usee 
prove  that  the  bond  on  which  they  sued  fulfilled  the 

requisitions  of  the  charter,  —  that  it  should  be  "  to  the  satis- 
faction of  the  directors,"  —  by  offering  in  evidence  the  fact  of 
1  §  20.   12  Wheat.  64. 

59 


§  20         OFFICIAL   BONDS    AND   LIABILITIES   OF   SURETIES. 

its  being  in  their  possession,  and  by  other  such  presumptive 
evidence  as  would  suffice  to  raise  the  legal  presumption  if  the 
banlv  had  been  an  individual.  The  defendants  objected  that 
this  evidence  was  inadmissible,  or,  even  if  admissible,  would 
not  be  sufficient ;  that  corporate  acts  must  be  proved  by  cor- 
porate records  and  minutes  of  proceedings,  and  since  these 
were  altogether  silent  on  the  subject  of  the  bond,  its  accept- 
ance and  approval,  as  required  by  the  law,  must  be  conclu- 
sively assumed  never  to  have  taken  place,  and  could  not  be 
shown  by  other  and  parol  testimony.  When  the  case  was 
tried  before  Chief  Justice  Marshall  in  the  Circuit  Court,  he 
adopted  the  views  of  the  defendants'  counsel ;  but  when  it 
came  before  the  full  bench,  they  reversed  his  decision.  A 
long  o])inion,  intended  to  be  exhaustive,  was  delivered  by 
Judge  Story,  to  the  effect  that  the  acceptance  and  approval 
might  be  proved  by  testimony  dehors  the  corporate  records, 
and  might  be  presumed  in  favor  of  the  bank,  as  matter  of  law, 
from  proof  of  the  same  facts  which  would  suffice  to  raise  the 
same  legal  presumption  in  favor  of  an  individual.  Chief 
Justice  Marshall,  adhering  to  his  original  views,  delivered  a 
dissenting  opinion.  But  the  decision  of  the  associate  justices 
of  course  settled  the  law. 

While  the  case  was  pending,  after  the  ruling  in  the  Circuit 
Court  and  before  its  reversal  had  been  pronounced,  a  like  case 
came  before  the  Supreme  Court  of  Massachusetts.  The  rec- 
ords of  the  bank  in  this  case,  however,  showed  that  J.  S.  B. 
Mass.  and  W.  D.  "  be  accepted  as  sufficient  sureties  in  a 

Bank"?  boud  to  be  given  by  the  cashier,"  &c.  Chief  Justice 
Chickering.  Parker  delivered  the  opinion.  He  expressed  sur- 
prise at  the  ruling  of  Chief  Justice  Marshall  in  the  Circuit 
Court,  above  stated,  saying,  "  We  should  have  supposed  that, 
in  the  case  as  well  of  a  corporation  as  of  an  individual,  a 
paper  intended  for  their  benefit,  and  found  on  their  files, 
would  be  considered  as  having  been  accepted  by  them."  But 
without  touching  this  principle,  in  this  cause,  "  the  vote  to 
accept  the  sureties,  and  the  bond's  being  in  the  possession 
of  the  president,  are  a  sufficient  acceptance  of  the  bond."  ^ 

2  Dedham  Bank  v.  Chickering,  3  Pick.  335. 
60 


FRAUD,  §  21 

Several  years  afterwards  the  same  court  again  held  that  parol 
evidence  was  admissible  to  show  that  the  bond  had  been  laid 
before  the  directors,  and  that  they  had  expressed  themselves 
satisfied  with  it,  and  that  this  was  in  law  equivalent  to  a  for- 
mal acceptance.^  The  same  doctrine  was  maintained  to  its 
full  extent  in  Maryland.-*  It  can  no  longer  be  considered  to 
bo  open  to  question.  The  fact  of  the  possession  by  the  bank 
of  a  bond  in  due  form,  legally  executed,  and  com[(lcte  in  every 
respect,  the  officer  having  been  allowed  to  enter  upon  his 
duties,  is  evidence  which  by  itself  will  suffice  to  authorize  a 
suit  upon  it  as  having  been  delivered  and  accepted  with  all 
requisite  formality.^ 

§  21.  Fraud  or  Illegality  in  the  Inception  of  the  Bond.  —  A 
bond  is  void,  if  illegal,  as  when  given  by  a  director  in  a  State 
where  directors  are  forbidden  to  be  sureties  on  the  bond  of 
an  officer  of  their  own  bank  ;  or  if  tainted  with  fraud,  as 
when  the  sureties  are  misled  by  intentional  or  careless  mis- 
representations of  the  directors,  or  by  their  concealment  of 
facts  which  they  know  increase  the  risk.**  But  it  is  held,  as 
we  shall  see,  that  directors  are  not  bound  to  disclose  facts 
which  do  not  affect  moral  character  or  official  integrity. 

It  is  a  general  principle  of  guaranty  that  non-disclosure  of 
the  falsity  of  facts  on  belief  of  which  the  obligee  knows  the 
surety  is  acting  discharges  him.  We  should  say,  the  conceal- 
ment by  the  directors  of  ani/  facts,  material,  and  peculiarly 
ivithin  their  knowledge,  is  fraud  ;  if  the  bond  only  covers  losses 
by  dishonesty,  facts  not  affecting  integrity  are  not  material, 
but  if  the  surety  is  responsible  for  losses  by  negligence,  then 
facts  which  increase  the  risk  of  loss  by  negligence  in  an 
important  ^  and  substantial  manner  are  material,  and  if  the 

8  Amherst  Bank  v.  Root,  2  Met.  522. 

4  Union  Bank  v.  Ridgely,  1  Har.  &  G.  324. 

6  Graves  v.  Lebanon  National  Bank,  10  Bush,  23;  Bostwick  r.  Van 
Voorhis,  91  N.  Y.  353,  quoting  the  words  of  the  text  substantially. 

°  §  21.  There  must  be  entire  good  faith  in  the  transaction  between 
obligee  and  surety;  any  taking  advantage  of  the  surety  by  withholding 
proper  information  will  avoid  the  contract.     Story's  Eq.  Juris.  §  324. 

1  Matters  which,  though  affecting  the  risk,  do  so  in  a  trivial  and  un- 
important manner,  or  are  remote  and  do  not  necessarily  affect  the  risk, 

61 


§  21  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

directors  know  such  facts  ^  by  reason  of  the  special  opportuni- 
ties of  observing  the  officer  that  his  past  emi)loyment  has 
afforded,  they  should  be  disclosed.  Receiving  a  guaranty  from 
G.  knowing  facts  which  G.  does  not  know,  and  has  not  had 
opportunity  to  know,  and  which  it  is  reasonable  to  suppose 
might,  if  known  to  him,  deter  him  from  giving  the  guaranty, 
is  a  fraud  by  all  the  analogies  ^  of  the  law,  as  well  as  by  the 
judgment  of  morality. 

though  it  is  conceivable  they  may,  or  such  matters  as  are  -within  the  con- 
templation of  every  reasonable  man,  as  the  slight  variations  of  prudence, 
care,  and  intellect  among  ordinary  men,  are  not  deemed  material.  If  an 
officer  already  in  the  directors'  service  is  re-elected,  they  are  not  bound  to 
state  to  his  sureties,  offered  upon  his  new  bond,  that  he  is  careless,  negli- 
gent, stupid,  or  a  poor  and  inaccurate  accountant.  They  are  not  obliged 
to  state  that  they  themselves  have  been  remiss  in  examining  into  the  con- 
dition of  the  bank,  the  amount  of  its  funds  on  hand,  and  the  correctness 
of  its  accounts.  Neither  need  they  state  the  existence  of  other  and  prior 
bonds,  even  though  they  may  be  still  in  force.  But  if  they  know  that 
there  is  in  fact  a  defalcation  existing  which  will  be  covered  by  the  terms 
of  the  proposed  bond,  they  are  bound  to  state  it,  and  their  failure  to  do  so 
is  such  a  breach  of  good  faith  on  their  part  as  will  invalidate  the  contract. 
Even  where  a  party  offered  as  bondsman  had  been  a  director  in  the  bank 
itself  at  the  time  the  defalcation  took  place,  and  ought  therefore  from  the 
nature  of  his  official  duty  to  have  been  aware  of  it,  it  was  held  that  the 
obligation  of  his.bond  could  not  be  enforced  against  him,  if  he  should  show 
that  as  matter  of  fact  he  did  not  know  it;  that  his  co-directors  had  care- 
fully concealed  it  from  him  up  to  and  after  the  time  of  his  executing  the 
bond,  and  apparently  with  the  very  object  of  leading  him  to  execute  a 
bond  which  would  by  its  terms  cover  it.  Franklin  Bank  v.  Cooper,  3G 
Me.  179;  39  id.  542;  Franklin  Bank  v.  Stevens,  39  id.  532;  Smith  v. 
Bank  of  Scotland,  1  Dow,  Pari.  R.  294.  The  essence  of  the  matter  seems 
to  be,  that  the  sureties,  unless  informed  to  the  contrary,  have  a  right  to 
suppose  that  their  undertaking  is  in  the  ordinary  course  of  business,  simi- 
lar in  all  material  respects  to  other  like  undertakings,  and  exposing  them 
to  no  peculiar  and  hidden  risks. 

2  For  example,  such  marked  and  unusual  carelessness  or  stupidity  as 
to  make  it  unreasonable  to  suppose  the  surety  would  guarantee  one  so 
wholly  incompetent,  and  so  exceedingly  likely  to  involve  him,  if  he  was 
in  possession  of  the  facts  known  to  the  directors. 

8  If  the  fraud  be  such  that  without  it  the  contract  would  not  have  been 
made,  it  is  material;  but  if  it  is  probable  the  same  thing  would  have  been 
done  in  the  same  way  without  the  deceitful  conduct,  it  is  not  material. 
2  Parsons  on  Contracts,  267.     The  insured  must  state  all  facts  within  his 

62 


DIRECTORS   AS   SURETIES.  §  21 

Of  course  fraud  on  one  surety  docs  not  affect  the  liability  of 
co-sureties,  with  whom  tlie  dealings  were  strictly  in  good  faith.* 

We  will  now  more  fully  consider  the  points  thus  briefly 
stated. 

a.  Can  a  Director  be  a  Surety?  —  The  first  question  which 
presents  itself  is  whether  a  director  can  be  a  surety  upon 
the  bond  of  any  officer  of  his  own  bank.  In  some  States  this 
has  beeti  forbidden  by  legislative  enactment.  But  it  is  not 
thus  forbidden  by  the  National  Banking  Act;  and  when  not 
forbidden  by  statute,  it  cannot  be  said  to  be  absolutely  illegal. 
The  law  and  the  morality  are  both  so  very  neatly  put  by  Chief 
Justice  Shaw  that  we  are  tempted  to  give  his  own  words  : 
"  The  next  exception  is,  that  the  bond  was  void,  as  against 
the  policy  of  the  law,  because  three  of  the  directors,  -^^nkT 
whose  duty  it  was  to  examine  and  approve  the  Boot, 
cashier's  bond,  were  themselves  his  sureties.  This  exception 
certainly  comes  with  a  very  bad  grace  from  those  directors 
who  thus  became  sureties.  It  sets  up  the  dereliction  of  their 
duties  as  directors,  to  avoid  their  obligation  as  contractors. 
It  may  have  been  in  very  bad  taste,  it  may  have  been  very 
indiscreet  and  ill-judged,  to  put  themselves  in  a  situation  to 
express  an  opinion  on  their  own  sufficiency  as  such  sureties. 
But  whether  right  or  wrong,  it  is  impossible  to  perceive  how 
the  obligors,  either  such  directors  themselves,  or  their  co- 
obligors,  can  avail  themselves  of  this  circumstance  to  avoid 
their  obligation.  Another  objection  .  .  .  was,  that  if  direc- 
tors, so  being  sureties  on  the  deed,  could  approve  or  accept  the 

knowledge  which  would  have  an  influence  on  the  terms  of  the  contract, 
and  are  not  known,  or  may  be  supposed  by  him  not  to  be  known,  to  the  in- 
surer. Lindenau  v.  Desborough,  8  B.  &  C.  586;  Bufe  v.  Turner,  G  Taunt. 
338;  Clark  v.  Man.  Ins.  Co.,  8  How.  235;  New  York  Bowery  Ins.  Co. 
V.  New  York  Ins.  Co.,  17  Wend.  359;  Fletcher  w.  Commonwealth  Ins.  Co., 
18  Pick.  419.  See  also  Benj.  on  Sales,  §  461,  and  Kerr  on  Fraud  and 
Mistake;  also  Maynard  v.  }klaynard,  49  Vt.  299;  Bruce  v.  Ruler,  2  M.  & 
R.  3;  Hill  V.  Gray,  1  Stark.  4-34. 

*  See  cases  cited  in  note  1  to  this  section.  If,  however,  the  obtain- 
ing of  A.'s  signature  is  the  condition  of  B.'s  signing,  and  A.'s  name  is 
fraudulently  obtained,  B.  cannot  be  lield.  Franklin  Bank  v.  Stevens, 
39  Me.  532. 

63 


§  21  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

deed,  it  was  in  effect  a  contract  with  themselves,  and  of  no 
binding  effect.  .  .  .  Here  the  corporation  is  an  artilicial  per- 
son in  law,  distinct  from  all  the  individuals  composing  it, 
capable  of  contracting  and  bringing  suits,  ;ind  may  contract 
with  its  own  members,  or  have  suits  against  them,  as  well  as 
against  any  other  persons."  ^ 

In  Maine  the  State  banking  law  provided  that  the  bond 
should  not  be  "  signed  "  by  a  director.  But  on  the  ground 
that  the  bond  was  not  operative  or  valid  till  it  had  been  ac- 
cepted, it  was  held  that  if  the  signer  was,  at  the  time  of  sig- 
nature, a  director,  but  had  ceased  to  be  so  at  the  time  of 
acceptance,  there  was  no  violation  of  the  statute.^  It  was 
held  in  another  case  that  the  same  law  would  invalidate  an 
obligation,  and  a  mortgage  security  accompanying  it,  given  by 
a  director  to  third  parties  to  indemnify  them  against  loss  as 
sureties  upon  an  official  bond,  the  object  being  to  induce  them 
to  become  such  sureties.'^ 

h.  Misrepresentations.  Where  an  embezzlement  by  a  cashier 
had  occurred,  and  might  have  been  discovered  by  a  very 
limited  measure  of  diligence  on  the  part  of  the  directors,  and 
they  yet  failed  to  detect  it,  and  published  a  statement  of  the 
affairs  of  the  bank,  going  to  show  a  faithful  and  careful  man- 
agement and  proper  condition  of  its  affairs,  and  two  persons, 
having  read  this  statement,  became  sureties  on  the  cashier's 
bond,  it  was  held,  in  Kentucky,  that  they  had  a  good  defence 
to  a  suit  against  them  to  make  good  losses  caused  by  his 
subsequent  embezzlements.^ 

c.  Concealment.  In  the  case  above  cited  of  Franklin  Bank 
V.  Stevens,  the  sureties  on  a  cashier's  bond  bound  themselves 
by  the  language  of  the  bond  to  guarantee,  not  only  that  the 
cashier  should  account  for  all  money  to  be  subsequently  re- 
ceived by  him,  but  also  that  he  should  account  for  all  money 
previously  received  by  him.  It  was  held  that  evidence  offered 
by  the  sureties  of  the  unskilful  and  careless  keeping  of  the 

6  Amherst  Bank  v.  Root,  2  Met.  522. 
«  Franklin  Bank  v.  Cooper,  36  Me.  179. 
1  Jose  V.  Hewett,  50  Me.  248. 
8  Graves  v.  National  Bank,  10  Bush,  23. 

64 


CONCEALMENT   BY   DIRECTORS.  §  21 

books  of  the  bank,  of  the  negligence  of  the  directors  and  the 
bank  commissioners,  and  tlie  non-existence  of  other  bonds,  all 
relating  to  the  time  prior  to  the  date  of  the  bond  in  suit,  was 
immaterial,  as  having  no  bearing  on  the  liability  of  the  sure- 
ties. Though  evidence  tending  to  show  knowledge,  on  the 
part  of  the  bank  ofificers,  that  property  of  the  bank  had  been 
lost  by  the  cashier  prior  to  the  execution  of  the  bond,  would 
have  been  competent,  as  having  a  direct  bearing  on  the 
liability  of  the  sureties.^ 

In  Pennsylvania,  a  case  arose  where,  at  the  time  the  sure- 
ties executed  a  bond  for  the  teller,  he  had  already  defrauded 
the  bank,  though  he  had  not  been  as  yet  detected  or  suspected 
by  the  officers.  The  defendant  (the  surety)  sought  to  show 
in  defence,  that,  if  the  officers  had  examined  the  books  of  the 
bank  at  the  time  of  the  giving  of  the  bond,  they  would  have 
been  able  to  detect  the  then  existing  deficiency.  The  court 
said  that  a  fraudulent  concealment  of  the  defalcation,  at  the 
time  when  the  bond  was  executed,  would  have  constituted 
a  defence.  But  that  there  was  no  such  concealment,  since 
there  was  no  such  knowledge  ;  that  the  "  sort  of  constructive 
notice  "  which  the  defendant  sought  to  allege  could  not  be 
permitted  to  be  set  up  to  defeat  his  liability  ;  that  the  officers 
were  under  no  obligation  to  investigate  the  books  when  the 
bond  was  given,  and  their  failure  to  do  so,  and  ignorance  con- 
sequent upon  such  failure,  constituted  no  basis  for  a  defence 
in  this  suit.  Though  it  was  intimated  that  a  different  rule 
might  have  prevailed  had  the  surety  at  the  time  requested 
an  examination,  and  the  request  had  been  either  refused  or 
evaded.^" 

The  directors  knew  of  certain  irregularities  and  omissions 
of   0.  while  teller,  but  did   not  suppose  them   to 
affect  his  moral  character  or  official  integrity,  and  Bostwick  v. 
did  not  disclose  them  to  the  sureties  on  his  bond 
as  cashier.      This   was   held  no   defence  to   a   suit  on  the 
bond.'i 

9  Franklin  Bank  v.  Stevens,  39  Me.  532. 

10  Wayne  v.  Commercial  National  Bank,  52  Pa.  St.  343. 
"  Bostwick  V.  Van  Voorhis,  91  N.  Y.  353. 

VOL.  I.  6  65 


§  23  OFFICIAL   BONDS    AND   LIABILITIES   OF   SURETIES. 

Loss  NOT  OP  A  Nature  covered  by  the  Bond. 

§  22.  Loss  by  Act  of  another  than  the  Officer  guaranteed.  — 
A  loss  of  moneys  or  securities  by  reason  of  a  theft  or  rob- 
bery, accomplished  without  the  collusion  of  the  officer,  and 
not  furthered  or  rendered  possible  by  his  negligence  or  mcom- 
petence,  would  be  a  good  defence  to  a  suit  upon  a  bond  writ- 
ten in  any  of  the  forms  heretofore  described.^  The  bondsmen 
are  certainly  not  insurers  against  the  acts  of  any  person  save 
the  principal  in  the  bond. 

§  23.  Innocent  Mistake.  —  The  officer  contracts  for  ordi- 
nary skill  and  prudence,  and  it  is  this  the  surety  guar- 
antees, and  if  a  cashier  causes  loss  by  a  mistake  such  as 
cashiers  of  experience  are  liable  to  make  sometimes,  it  is 
not  a  loss  for  which  the  sureties  are  liable,  unless  the  words 
of  the  bond  are  absolute,  and  expressly  agree  that  the  officer 
shall  do  certain  specific  things ;  in  such  case,  if  the  officer 
fails  to  do  these  things,  by  mistake  or  otherwise,  the  surety 
is  liable. 

But  though  an  overpayment  by  mistake  may  be  set  up,  and 
often  successfully,  in  defence  to  a  suit  upon  a  bond,  it  is  ne- 
cessary that  the  officer  should  have  acted  honestly,  not  only 
in  the  transaction  of  overpayment,  but  equally  in  reference  to 
all  matters  which,  however  remotely,  concern  it  or  are  con- 
nected with  it.  If  he  subsequently  commits  any  deceit  or 
fraud,  or  makes  false  entries  in  the  books,  for  the  purpose  of 
concealing  the  deficiency,  his  dishonest  dealing  in  this  par- 
ticular will  suffice,  in  the  eye  of  the  law,  to  give  the  coloring 
of  guilt  to  the  entire  affair  from  the  very  outset.  It  may  still 
remain  true,  that  the  actual  loss  of  the  money  was  caused 
wholly  and  solely  by  the  innocent  over-payment ;  and  that  the 
subsequent  misconduct  could  not  aggravate  the  injury,  as  sub- 
sequent good  conduct  could  not  have  remedied  it.  Still  the 
acts  resorted  to  for  securing  concealment  are  a  suggestio 
falsi;   the  concealment  itself  is  a  suppressio  veri.     Each  is 

1  §22.  Allison  v.  Farmers'  Bank,  6  Rand.  204;  American  Bank  v. 
Adams,  12  Pick.  303;  Planters  &  Merchants'  Bank  v.  Hill,  1  Stew. 
201. 

66 


WHAT   SKILL   AND    CARE   THE   BOND    REQUIRES.  §  24 

an  unfaithfulness,  and  will,  as  a  rule,  be  assumed  to  have 
contributed  to  the  injury  suffered  by  the  bank.^ 

If  the  bond,  instead  of  insuring  honesty  and  competency  in 
such  general  terms  as  are  displayed  in  the  foregoing  instances, 
enumerates  specific  acts  in  distinct  language,  and  guarantees 
that  the  officer  shall  perform  these  acts,  the  peril  of  possible 
mistakes  in  their  performance,  however  innocent  and  excus- 
able the  error  may  be,  is  assumed  by  the  obligors.  A  deliber- 
ate undertaking,  for  example,  that  the  cashier  shall  "  deliver 
to  Ms  successor  in  office  .  .  .  all  moneys^  securities,  stocks,  &c., 
&c,,"  is  an  absolute  and  unconditional  guaranty  for  such 
delivery,  and  the  fact  of  an  innocent  loss,  growing  out  of  an 
excusable  mistake,  cannot  be  availed  of  in  defence  to  a  suit 
for  non-delivery .2 

§  24.  Negligence  of  the  Officer.  —  The  officer  contracts  for 
reasonable  skill  and  diligence,  and  the  surety  guarantees  he 
will  fulfil  his  contract  unless  he  expressly  narrows  his  en- 
gagement, and  no  words  can  be  relied  on  to  restrict  the  lia- 
bility of  a  bank  oflBcer's  bondsmen  to  mere  personal  honesty 
and  integrity,  unless  these  terms  or  their  clear  equivalents  are 
used,  and  stated  as  the  limits  of  the  insurance. 

If  the  officer's  conduct  is  above  the  line  of  ordinary  skill 
and  care,  as  observed  among  persons  of  his  class,  the  case 
comes  under  §  23 ;  that  is,  where  only  such  slight  negligence 
attaches  to  the  officer  as  is  to  be  expected  of  ordinary  men  in 
his  position.  This  is  the  substance  of  the  law  of  this  topic, 
both  on  principle  and  authority. 

Of  course  considerable  variety  is  found  to  exist  in  the  form 
and  language  of  the  bonds  used  by  different  corporations,  and 
especially  in  those  portions  wherein  is  described  the  species  of 
good  and  satisfactory  conduct  which  is  insured.  Very  com- 
monly only  general  phraseology  is  used.  It  is  stipulated  simply 
that  the  officer  shall  "  tvell  and  faithfully,''  or  ''faithfully,"  or 
"  tvell  and  truly,'''  discharge  and  perform  his  duties.  Practi- 
cally, it  may  be  considered  that  these  phrases  are  equivalent 

1  §  23.  Union  Bank  v.  Clossey,  11  Johns.  182 ;  Rochester  City  Bank  v. 
Elwood,  21  N.  y.  88. 

2  State  Bank  v.  Chetwood,  3  Halst.  1. 

67 


§  24  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

each  to  either  of  the  others.  For  though  a  finical  linguist 
might  seek  to  draw  some  delicate  distinction  between  the  sig- 
nification of  the  word  "  well  "  on  the  one  side,  and  the  words 
"  faithfully  "  and  "  truly  "  on  the  other,  yet  such  over  nicety 
is  not  encouraged  by  the  law  which  has  been  laid  down  in  the 
premises ;  and  it  is  safe  to  say  that  these  words  may  be  used 
interchangeably.  The  better  rule  of  construction,  which  is  to 
be  applied  to  all  alike,  seems  to  be  that  they  are  designed  not 
only  to  guarantee  honesty  and  obedience,  but  also  reasonable 
skill,  competence,  and  diligence.  The  reason  for  taking  the 
bond  is  by  no  means  limited  to  the  narrow  object  of 

Carelessness  .  i  •        i  i  •  i  • 

and  igno-  protcctmg  the  banking-house  only  against  loss  aris- 
ing from  embezzlement  or  other  species  of  criminal 
conversion  and  misappropriation,  but  also  against  the  equally 
mischievous  danger  of  carelessness,  thoughtlessness,  and  ig- 
norancc.i  The  security  for  the  "  faithful  discharge  "  of  duties 
would  be  rendered  "  utterly  illusory,"  if  its  import  were  to  be 
narrowed  to  a  guaranty  against  personal  frauds  only.  Duties 
performed  negligently  and  unskilfully,  or  violated  from  want 
of  capacity  or  want  of  care,  can  never  be  said  to  be  "  well  and 
truly  "  executed.^  In  Massachusetts  a  bond  calling  only  for 
"  faithful  "  performance  was  declared  to  bind  the  obligors,  not 
only  for  the  honesty  of  the  officer,  but  also  for  his  "  faithful 
execution  of  the  duties  of  his  office,  which  embraces  compe- 
tent skill  and  due  dilgence."  ^  It  must  certainly  be  considered 
that  the  last  two  cases,  one  of  which  was  decided  in  the  highest 
tribunal  in  the  land,  establish  the  correct  rule  of  law.  Yet  in 
New  York  there  is  a  well-known  cause  in  which  precisely  the 
opposite  doctrine  was  laid  down.  The  bond  of  a  teller  was 
conditioned  that  ho  should  "  well  and  faithfully  perform  the 
duties,"  (fcc.  The  court  declared  that  this  was  security  solely 
for  his  honesty  in  his  trust,  and  not  for  his  competency.^  Yet 
it  is  very  curious  to  note  that,  though  the  conflict  between  the 
abstract  statement  of  law  in  New  York  and  in  Massachusetts 

1  §  21.  Roarers  v.  Kelly,  2  Camp.  123. 

2  Minor  v.  Mechanics'  Bank,  1  Pet.  46. 

8  American  Bank  v.  Adams,  12  Pick.  30-3. 
«  Union  Bank  v.  Clossey,  10  Johns.  271 ;  11  id.  182. 
68 


SKILL   AND   CARE   REQUIRED    BY   BOND.  §  24 

could  not  well  be  more  direct  and  apparently  irreconcila- 
ble, nevertheless  both  courts,  having  substantially  like  facts 
to  deal  with,  might  not  improbably  come  to  very  nearly  the 
same  practical  results.  In  New  York,  it  was  said  that  an 
overpayment  by  mistake,  honestly  made,  was  a  matter  of  in- 
competency, and  was  not  insured  against  in  the  bond.  In 
Massachusetts,  it  was  an  obvious  inference  from  the  language 
of  the  court  that,  if  the  fact  was  that  the  deiicicncy  was 
caused  by  an  overpayment,  made  honestly  and  through  a  sim- 
ple mistake,  then  evidence  that  experienced  and  able  tellers 
were  liable  occasionally  to  make  such  mistakes  would  have 
been  admitted  for  the  purpose  of  showing  that  at  least  this 
fact  did  not  of  itself  sufiBce  to  prove  incompetence.  It  is 
not  to  be  supposed  that  ample  evidence  of  this  description 
could  ever  be  found  inaccessible.  Whence  it  might  not  im- 
probably occur  that,  upon  diametrically  opposite  doctrinal 
bases,  the  same  conclusion  of  acquitting  the  sureties  might  be 
arrived  at. 

If  the  two  above-cited  decisions  are  the  only  ones  which 
directly  and  in  terms  run  counter  to  the  New  York  decision, 
there  is  yet  a  decision^  in  the  Pennsylvania  reports  which 
fails  to  do  so  only  because  it  goes  much  farther,  pa. 
though  in  the  same  direction,  than  either  the  Su-  ^..^^Ba"!  of 
preme  Court  of  the  United  States  or  the  bench  of  Washington. 
Massachusetts.  In  this  case  the  bond  was  condi- 
tioned that  "  J.  B.,  the  cashier,  shall  well  and  truly  perform 
the  duties  of  cashier  of  the  bank  aforesaid,  to  the  best  of  his 
ahilities."  The  Italicized  words  certainly  ought  to  have  suf- 
ficed to  exclude  from  the  operation  of  the  guaranty  acts  of 
simple  incompetency  or  ignorance,  if  any  language  short  of  an 
exclusion  in  terms  could  do  so.  The  defendant's  counsel 
argued  thus,  and  urged  that  the  insurance  of  the  bond  was 
restricted  to  the  cashier's  fidelity  and  honesty  ;  the  degree  of 
his  ability  might  be  considered  as  expressly  exempted,  pro- 
vided his  best  ability,  such  as  it  might  prove  to  be,  was  uni- 
formly used.  Certainly  these  arguments  were  not  devoid  of 
force.  The  court  complimented  them  as  ingenious,  but  de- 
6  Barrington  v.  Bank  of  Washington,  14  Serg.  &  R.  405. 

69 


§  24  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

clarcd  tlicm  unsound.  The  opinion  held,  substantially,  that 
the  covenant  was  that  the  cashier  should  discharge  the  duties 
of  his  appointment,  that  is  to  say,  that  he  should  do  so 
with  competent  skill  and  ability.  It  was  said  that  one  who 
accepts  an  office  or  trust  of  any  kind  contracts  to  execute  it 
with  competent  skill  and  ability  ;  his  sureties,  who  are  bound 
that  he  shall  execute  it  according  to  his  skill  and  ability,  war- 
rant for  the  performance  of  this  contract  of  the  officer.  His 
undertaking  is  to  act  according  to  the  duties  of  his  station. 
So,  if  by  his  act  of  honest  intention,  but  in  excess  of  his  au- 
thority, the  bank  suffers  a  loss,  it  must  be  reimbursed  by  the 
obligors  in  the  above  bond.^ 

This  is  subtle  and  not  altogether  unanswerable  reasoning. 
It  proceeds  on  the  basis  of  what  it  is  supposed  that  the  bond 
would  naturally  be  designed  to  contain,  rather  than  upon  the 
basis  of  what  it  really  does  contain.  There  is  a  little  con- 
fusion, moreover,  between  the  undertaking  of  the  cashier, 
implied  by  his  entry  into  office,  and  that  of  the  sureties, 
actually  expressed  in  the  instrument ;  between  the  liability 
of  the  cashier  at  common  law,  and  that  which  exists  under 
and  by  virtue  of  the  stipulations  of  the  bond.  It  is  true 
that  the  cashier  by  the  acceptance  of  the  trust  impliedly  con- 
tracted to  exercise  it  with  due  skill  and  ability  ;  but  it  was 
hy  the  acceptance  of  the  trust,  strictly  and  literally,  and  not  at 
all  by  the  execution  of  the  bond,  that  he  thus  contracted.  It 
is  possible  that  his  acceptance  of  office  may  have  placed  him 
under  obligations  greater  than  those  named  in  his  bond.  But 
to  say  that  the  sureties  in  the  bond,  who  defined  in  perfectly 
intelligible  language  the  extent  to  which  they  consented  to 
become  guarantors,  could  have  the  same  extended  until  it  be- 
came commensurate  with  a  liability  of  another  person,  their 
principal,  rising  from  an  entirely  alien  origin,  seems  to  us 
hardly  a  tenable  position.  It  is  not  a  logical  sequence,  but  a 
verbal  illusion,  to  say  that,  because  the  cashier,  by  accepting 
office,  binds  himself  to  use  due  skill  in  its  functions,  therefore 
his  bondsmen,  expressly  guaranteeing  only  that  he  shall  use 
skill  "  to  the  best  of  his  abilities,"  imj)licdly  assume  and  guar- 
antee that  the  skill  thus  described  is  due  skill.  This  is  to 
70 


ACT   OUTSIDE   OFFICIAL   SPHERE.  §  25 

read  their  contract  by  the  light  of  his  ;  to  embody  his  indi- 
vidual and  implied  undertaking,  arising  from  his  individual 
act,  into  their  specifically  worded  and  independent  undertak- 
ing ;  to  substitute  the  measure  which  a  legal  implication  ap- 
plies to  his  contract  for  skill,  in  place  of  the  measure  which 
they  in  their  contract  have  taken  pains  to  provide  in  exact 
phraseology.  But  though  the  original  soundness  of  this  opin- 
ion may  be  thus  criticised,  yet  it  must  be  acknowledged  to 
be  the  law.  It  has  stood  for  long  years  unchallenged,  and 
perhaps  it  would  now  be  foolish  to  change  it. 

§  25.  Loss  occasioned  by  an  Act  of  O.  in  Excess  of  his  Au- 
thority. —  If  an  officer  goes  outside  of  his  duties,  as  to  take 
funds  he  had  no  occasion  to  touch,  the  better  opinion  is  that 
the  surety  is  bound,  for  the  "  faithful  discharge  "  of  his  office 
implies  that  he  shall  not  go  outside  of  it,  even  though  his 
intention  is  honest,^  especially  not  to  use  the  opportunities  it 
affords  him  to  embezzle  the  bank's  funds,  or  defraud  it.  A 
case  in  Virginia,  however,  holds  the  contrary. 

But  O.'s  act  beyond  authority  must  cause  loss  to  the  bank  ; 
if  it  is,  for  instance,  an  act  of  agency  which  does  not  bind  the 
bank,  no  cause  of  action  against  the  sureties  arises  unless 
the  bank  sees  fit  to  ratify  the  act.  We  will  now  examine  the 
cases  and  develop  more  fully  the  points  thus  briefly  stated. 

In  Allison  v.  Farmers'  Bank,^  a  Virginian  bench  held  that 
the  sureties  on  an  accountant's  bond  were  not  liable  for  his 
theft  of  money  from  the  teller's  drawer,  since  his  bond  se- 
cured only  his  fidelity  in  the  "  office  of  accountant,"  and  as 
accountant  he  was  not  put  in  possession  of  any  money  of  the 
bank.     This  ruling  seems  thoroughly  narrow  and  unsatisfac- 
tory ;  it  was  rendered  only  by  a  divided  court,  and  has  been 
deliberately  overruled  in  New  York  in  the  case  above  cited, 
of  Rochester  Bank  v.  Elwood,^  with  the  true  criti-  n.  y. 
cism  that  its  principle,  if  followed,  would  substan-   B°J;k^i,^^'^ 
tially  cancel  all  official  bonds.     In  tliis  latter  case,   EUvood. 
also,  the  bond  specifically  secured  the  faithful  discharge  "  of 
the  trust  reposed  in  [the  officer]  as  assistant  book-keeper." 

1  §  25.  See  Barrington  j;.  Bank  of  Washington,  §  24. 

2  6  Rand.  204.  s  21  N.  Y.  88. 

71 


§  25  OFFICIAL   BONDS   AND   LIABILITIES   OP   SUKETIES. 

In  this  case,  also,  he  embezzled  funds  which,  in  the  strict 
performance  of  his  duties,  he  had  no  occasion  to  touch,  and 
then  he  made  false  entries  in  his  books  to  conceal  the  fact. 
This  last  feature  in  the  case  gives  rise  to  some  remarks  in 
the  opinion  not  perhaps  strictly  bearing  upon  the  ])rccise  point 
in  discussion  ;  but  rather  than  mutilate,  or  give  in  an  imper- 
fect shape,  the  reasoning  of  the  court,  we  shall  condense  the 
whole.  The  judge  said  that,  construing  the  instrument  by 
the  light  of  attendant  circumstances,  he  did  not  think  that 
the  bond  was  limited  to  insuring  mere  fidelity  in  the  actual 
book-keeping.  The  hook-keeper  was  in  such  close  contact  that 
he  could  easily  abstract  money,  and  more  easily  than  any  one 
else  could  conceal  the  abstraction  by  falsifying  his  books. 
These  facts  must  he  presumed  to  have  been  known  to  the  sure- 
ties, when  they  guaranteed  his  faithful  performance  of  a  trust 
as  an  employee  in  the  hank.  It  cannot  he  fairly  supposed  that 
they  intended  to  guarantee  only  that  he  shoidd  keep  the  hooks 
correctly,  hut  rather  that  he  should  he  honest  and  faithful  in 
his  trust  as  an  employee  of  the  hank.  They  engaged  absolutely 
for  his  integrity  and  fidelity  in  the  discharge  of  the  trust  of 
assistant  book-keeper.  The  bond  indicated  the  department 
to  which  he  was  to  be  assigned,  and  guaranteed  that  he  was 
a  trustworthy  person  to  discharge  its  duties.  Jlis  ^'■faithful 
discharge  "  of  the  trust  implies  an  engagement  that  he  shall  7iot 
transcend  it  to  embezzle.  If  he  does  transcend  it,  and  uses  the 
opportunities  it  affords  him,  for  the  purpose  of  stealing,  it  is 
not  a  '■'■faithfid  dischar-ge.^^  Therefore  he  is  liable  for  the 
abstraction,  per  se.  But  especially  would  he  be  liable  if  the 
false  entries  were  concurrent  and  simultaneous  with,  and  a 
part  of,  the  guilty  res  gestce.  A  liability  which  would  clearly 
have  accrued  had  these  entries  been  made  to  enable  a  confed- 
erate to  take  the  money  cannot  be  evaded  by  the  book-keeper's 
taking  it  liimsclf.  It  is  no  defence  that  the  false  entries  were 
made  solely  to  enable  him  to  escape  detection.  lie  used  a 
means  furnished  by  his  agency  to  consummate  successfully 
a  fraud.  The  taking  and  the  entries  were  one  transaction, 
and  it  can  hardly  be  contended  that  the  ultimate  loss  of 
the  bank  was  in  no  degree  attributable  to  the  false  book- 
72 


ACT   OUTSIDE   OFFICIAL   SPHERE.  §  25 

keeping  and  the  abuse  of  trust  as  book-keeper.  The  falsifi- 
cation was  parcel  of  the  wrongful  act,  and  this  is  deemed 
sufficient. 

Indeed,  it  seems  a  reasonable  general  rule  to  assert,  that,  if 
the  ofiiccr  has,  in  any  part  of  the  transaction,  acted  otherwise 
than  in  perfect  honesty  and  good  faith,  excuses  cannot  be 
heard  to  absolve  the  sureties.  It  is  impossible  to  split  up 
the  transaction  into  parts,  and  to  say  this  part  was  the  only 
part  which  actually  caused  the  injury,  and  this  part  was 
honest.  Such  a  system  of  legal  anatomy  is  simply  absurd. 
Originally  it  was  open  to  the  courts  to  declare  the  undertaking 
absolute,  and  to  refuse  to  admit  any  explanatory  matter  by 
way  of  exculpation.  If  practical  justice  effected  a  relaxation 
of  this  possible  stringency,  yet  it  was  only  for  the  sake  of  pro- 
tecting substantial  ho7ia  fide  innocence,  not  to  aid  in  intro- 
ducing a  practice  of  the  artful  dissection  of  a  complete  whole 
into  guilty  and  innocent  components,  and  the  referring  the 
injury  to  the  one  or  the  other  of  these.  If  in  any  portion  of 
the  entire  business  there  has  been  dishonesty,  this  must  be 
regarded  as  tainting  the  whole. 

When  we  come  to  the  subject  of  the  powers  and  duties  of 
cashiers,  it  will  be  seen  that  dealings  may  be  had  with  these 
officers  under  such  circumstances  of  time  and  place 
that  the  bank  may  not  be  bound  by  them.  But  the 
bank  may  at  any  time  waive  the  irregularity,  abandon  its 
defence,  and  assume  the  liability  which  the  party  dealing 
with  the  cashier  sought  to  impose  upon  it.  It  has  an  unques- 
tionable right  to  do  this,  if  it  chooses.  It  depends  upon  the 
choice  which  the  bank  shall  make  between  repudiation  or 
ratification,  whether  or  not  it  can  have  any  remedy  on  the 
official  bond.  If  it  repudiates  the  transaction,  it  cannot  sue 
upon  the  bond ;  for  the  reason  that  it  has  avoided  all  suffering. 
It  would  have  no  possible  cause  of  action.  But  if  it  ratifies 
and  adopts  the  transaction,  the  right  of  action  for  compensa- 
tion for  any  injury  consequent  upon  the  irregularity  accrues. 
Where  a  bank  has  to  consider  what  line  of  action  it  shall 
take  in  such  circumstances,  it  must  be  governed  by  its  views 
of  wise  policy  in  the  premises.     If  its  reputation  would  suffer 

73 


§  26  OFFICIAL   BONDS    AND    LIABILITIES   OF   SURETIES. 

from  a  rigid  adherence  to  its  rights,  and  a  more  liberal  con- 
duct is  deemed  advantageous,  it  has  the  unquestionable  right 
to  act  accordingly.  It  is  under  no  obligation  to  the  sureties 
in  the  bond  to  stand  upon  its  extreme  legal  rights,  and  to 
narrow  down  their  liability  and  watch  over  tlieir  interests 
to  the  sacrifice  of  its  own.  The  possibility  of  such  dilemmas 
occurring,  and  of  the  decision  being  in  favor  of  corporate 
ratification,  is  an  event  which  every  bondsman  must  be  as- 
sumed to  contemplate  as  constituting  an  essential  part  of  his 
risk.  But  it  is  evident  that  if,  by  the  decision  of  the  bank, 
the  act  does  not  bind  it,  then  it  can  suffer  no  loss,  however 
official  the  proceedings  may  have  purported  to  be ;  and  it  is 
not  the  fact  that  the  act  purports  to  be  official,  and  thereby 
accomplishes  a  fraud  upon  others,  that  gives  the  right  of 
action  to  the  l)ank ;  but  it  is  the  fact  that  some  substantial 
loss  or  measurable  injury  has  been  actually  inflicted  upon 
the  bank  itself,  through  the  medium  of  the  dishonesty  or 
irregularity.^ 

§  26.  Unusual  Employment.  —  The  bond  covers  any  duties 
belonging  by  custom  to  the  office,  and  such  as  in  the  natural 
course  of  business  ^  are  assigned  to  the  officer,  as  in  the  tem- 
porary absence  of  a  fellow  officer,  or  any  similar  emergency. 
But  losses  occurring  by  reason  of  extra  duties  not  thus  rea- 
sonably within  the  contemplation  of  the  surety  ground  no 
suit  against  him  unless  the  words  of  the  bond  cover  the  loss 
of  the  given  kind  unqualifiedly.*^"     See  §  30. 

4  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  171. 

°  §  26.  A  bond  for  the  faithful  performance  of  the  duties  of  the  office 
of  teller  or  cashier  covers  all  defaults  in  the  duties  of  such  office  annexed 
from  time  to  time  by  those  who  are  authorized  to  control  the  affairs 
of  the  bank;  and  the  sureties  enter  into  the  contract  in  reference  to  the 
rights  and  authority  of  the  president  and  directors,  under  the  charter  and 
by-laws.  Minor  v.  Mechanics'  Bank,  1  Pet.  40;  Planters'  Bank  v. 
Lamkin,  R.  M.  Charlt.  29. 

'*"  A  bank  was  incorporated  with  power  to  appoint  all  necessary 
officers,  to  take  bonds  from  them,  and  to  make  all  necessary  by-laws, 
rules,  and  regulations.  By  one  of  the  by-laws  it  was  provided  that  it 
should  be  the  duty  of  every  other  officer  of  the  bank  to  perform  such  ser- 
vices as  might  be  required  of  them  by  the  president  and  cashier.  In  an 
action  against  the  principal  and  sureties  of  a  bond  given  by  a  book-keeper 

74 


EXTRA   DUTIES.  §  26 

A  bond  insured  that  the  clerk  should  "  well  and  faithfully 
serve,"  &c.,  and  should  not  "  cancel,  obliterate,  spoil,  destroy, 
waste,  embezzle,  spend,  or  make  away  with"  any  of   j,^^ 
the  books,  cash,  notes,  &c.  "  of  the  bank  or  of  any   JJeivnie  v. 
of  the  customers,  which  should  be  deposited  in  his   UiHiuaiified 

insurance. 

hands,  or  intrusted  to  his  custody  or  possession,  or 
come  to  his  care,  custody,  or  possession."  At  request  of  a 
customer,  the  clerk  was  sent  eleven  miles  to  receive  a  sum  to 
be  deposited  to  the  customer's  credit  in  the  bank.  On  his 
return  he  lost  the  sum.  In  suit  by  the  bank  the  jury  found 
that  it  was  not  the  custom  to  send  a  clerk  to  receive  deposits 
away  from  the  bank.  Nevertheless,  somewhat  strangely  as 
it  must  seem,  the  court  held  that  the  loss  was  covered  by  the 
condition  of  the  bond ;  remarking  that  the  same  would  be  the 
case  where  money  should  be  received,  or  a  check  paid  erro- 
neously or  wrongfully  after  banking  hours,  or  if  the  clerk 
should  be  despatched  to  London  on  an  emergency  to  procure 
funds.i  In  this  case  the  bond  seems  to  insure  against  loss 
of  funds  of  the  bank  coming  to  the  care  of  the  officer,  no 
matter  how. 

The  receiving  teller  was  assigned  the  duties  of  the  general 
teller,  in  the  temporary  absence  of  the  latter.     The  court  said 
that  a  bank  teller's  official  bond  covers  any  duties  Mich, 
to  which,  in  the  natural  course  of  business,  he  may   ings  Bauk^' 
be  assigned  by  the  cashier  or  other  superior  officer   Tem'pSary 
in  the  temporary  absence  of  the  person  whose  duty   absence. 
it  is  to  perform  them.^ 

A  book-keeper's  sureties  are  not  released  by  the  mere  fact 
that  he  also  assumed  the  duties  of  teller,  unless  the  errors 
were  connected  with  or  induced  by  the  employment  as  teller.^ 

of  a  bank,  conditioned  for  the  faithful  performance  of  the  duties  of  his 
office,  "and  of  all  other  duties  required  of  him  in  said  bank,"  the  bond 
was  adjudged  to  have  been  taken  in  conformity  with  the  charter;  and  the 
book-keeper  having,  whilst  in  discharge  "  of  the  other  duties  required  of 
him,"  taken  large  sums  of  money,  the  sureties  were  rendered  liable  on 
his  bond.     Planters'  Bank  v.  Lamkin,  R.  M.  Charlt.  29. 

1  Melville  v.  Doidge,  G  C.  B.  450. 

2  Detroit  Savings  Bank  v.  Ziegler,  49  Mich.  157. 

3  Home  Savings  Bank  v.  Traube,  75  Mo.  199. 

75 


§  27  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES. 

§  27.  Wrongful  Act  beyond  the  Period  of  the  Bond.  — 
Unless  otherwise  expressed,  the  bond  covers  the  legal  term  ^ 
of  of^^ice  of  the  person  guaranteed  (what  constitutes  the  legal 
term  being,  however,  a  difficult  question  in  some  cases,  see 
pp.  77-81) ;  but  whether,  nothing  being  said  in  the  bond  on 
the  subject,  the  surety  is  to  be  held  to  contemplate  the  pos- 
sible extension  of  the  officer's  term  under  his  election,  in 
consequence  of  legislative  action  prolonging  the  corporate 
existence  beyond  the  charter  limit,  quoire.  A  conflict  has 
been  supposed '-^  to  exist  on  this  point  between  New  Hamp- 
shire and  Pennsylvania;  but,  keeping  in  mind  the  rule  that 
the  words  of  a  judge  are  to  be  understood  in  reference  to 
the  facts  of  the  case,  the  seeming  disagreement  disappears. 
In  the  New  Hampshire  case,  the  bank  did  not  cease  to  exists 
the  legislative  medicine  being  administered  before  death,  and 
the  court  sustained  this  supplemental  liability,  such  a  con- 
tinuance of  the  officer's  term  being  within  reasonable  con- 
templation of  the  parties  at  the  time  of  making  the  bond. 
In  the  Pennsylvania  case  the  bank  had  ceased  to  exist  and 
was  resuscitated,  and  the  court  denied  that  the  bond  once 
dead  could  be  revived  in  this  way. 

So  the  cases  do  not,  upon  close  inspection,  seem  to  cross 
each  other.  When  the  charter  limit  is  actually  reached,  or 
the  bank  in  any  way  ceases  to  exist,  if  only  for  a  moment, 
the  officer  is  no  longer  an  officer ;  he  has  come  to  the  end  of 
his  term,  and  the  bond  is  dead,  and  can  only  be  revived  by 
act  of  the  parties  to  it,  or  by  some  event  expressly  provided 
for  in  the  bond  itself.  But  if  a  bond  covers  the  term  of  a 
cashier's  office,  and  by  reason  of  legislative  action  the  bank 
does  not  expire  at  the  original  charter  limit,  the  cashier's 
term  being  thereby  extended  unbroken  beyond  said  limit  by 
a  contingency  easily  within  the  contemplation  of  the  parties 
at  the  time  of  executing  the  bond,  it  is  at  least  clear  that  a 
case  holding  such  a  bond  to  cover  such  an  extension  is  not 
substantially  discordant  with  a  case  in  which  the  bank's  ex- 
istence' was  absolutely  determined,  though  the  language  of  the 

1  §  27.     See  §  16. 

2  See  1  Parsons  on  Contracts,  503. 
76 


PERIOD    COVERED    BY   BOND.  §  27 

judges  may  have  been  wider  than  their  cases,  their  decisions 
broader  than  the  foundation. 

However,  Ohio  presents  us  with  a  case  that  is  surely  in 
conflict  with  New  Hampshire;  but,  as  will  be  seen  by  referring 
to  the  citations  in  the  expansion  of  this  section,  the  court, 
instead  of  setting  out  reasons  for  the  faith  that  was  in  it, 
declares  the  references  of  the  counsel  conclusive.  And  yet, 
when  these  references  are  examined,  there  is  only  argument 
from  analogy.  In  each  case  where  the  question  of  period 
arose,  there  was  a  definite  limit  inherent  in  the  officer's  term  ; 
in  one  case  it  was  annual,  in  another  he  was  elected  for  six 
months,  and  of  course  such  limitations  are  very  different  from 
a  contingency  entirely  external  to  the  officer's  term.  Like 
that  of  the  dissolution  or  continuance  of  the  bank  at  the 
charter  limit,  there  is  nothing  certain  about  that ;  but  when  a 
cashier's  office  is  annual,  that  is  a  definite,  certain  limit,  upon 
the  very  subject  matter  of  the  bond. 

Therefore,  on  the  whole,  although  it  may  be  fairly  urged 
that  a  surety  should  have  the  benefit  of  any  doubt  as  to  what 
may  have  been  within  his  contemplation,  (though  Mr.  Burge 
thinks  his  words  must  be  construed  contra  proferentem,^  yet 
upon  the  cases  we  must  conclude  that  New  Hampshire  has 
the  only  well  considered  case  upon  the  precise  point. 

Taking  a  new  bond  at  a  re-election  determines  the  old, 
unless  expressly  reserved  by  a  proviso  in  the  new. 

It  is  not  necessary  that  all  the  acts  in  the  chain  of  wrongful 
conduct  causing  the  loss,  and  concealing  it,  should  be  done 
within  the  period ;  it  is  enough  to  charge  the  sureties,  if  any 
substantial  part  of  such  conduct  occurs  within  the  time 
covered  by  their  bond.  The  remainder  of  this  section  is 
devoted  to  a  fuller  treatment  of  these  points. 

The  bond  of  an  officer  remains  in  force  as  a  continuing 
obligation  only  during  the  period  for  which  he  le-  if  the  officer 
gaily  holds  office  under  his  election.  His  re-elcc-  a"n  expressly 
tion  at  the  end  of  this  period,  and  his  entry  upon  tilebond'has 
a  second  term  of  office,  though  no  actual  gap  inter-  [fjf^^perjod? 
venes,  do  not  operate  to  revive  or  to  keep  alive  his   Kffect  of 

'  ^  ^  nniuial  re- 

bond.     If  the  office  be  annual,  the  bond  should  be   election. 

77 


§  27  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

annually  renewed.  Tliougli  if  the  office  be  annual  with  the 
proviso  that  the  incumbent  shall  continue  to  hold  until  a  suc- 
cessor is  appointed  and  qualified,  and  the  officer  continues  to 
hold  over  after  the  expiration  of  the  year  by  virtue  of  this 
clause,  his  bond  will  likewise  continue  in  force.  It  is  essen- 
tial, however,  that  the  office  derive  an  annual  character  by 
force  of  some  law,  or  legal  resolution,  or  by-law,  if  the  obliga- 
tion of  the  bond  is  to  be  only  of  a  year's  duration.  If  the 
office  is  declared  to  be  so  by  the  charter,  or  in  the  organic 
law,  or  in  the  corporate  by-laws,  or  perhaps  even  by  a  vote  of 
the  corj)orate  government,  it  will  be  assumed  that  the  sureties 
entered  into  their  undertaking  with  a  view  to  this  established 
limitation  upon  its  continuance.^  But  we  have  the  authority 
of  Amherst  v.  Root,  cited  below,  for  the  doctrine  that  a  mere 
habit  or  usage  of  the  directors  to  re-elect  every  year  does 
not  impart  the  legal  character  of  annual  duration  to  the  office. 
The  sureties  are  not  supposed  to  have  regarded  a  custom 
which  has  in  fact  no  particular  necessity  or  object,  and  which 
may  at  any  time  be  broken  in  upon  or  wholly  abandoned  with- 
out changing  the  legal  position  of  affairs  in  any  respect.  The 
naked  fact  of  annual  re-election,  therefore,  is  not  sufficient  to 
make  the  obligation  of  the  bond  only  annual.  This  rule  ap- 
plies to  all  cases  in  wdiich  the  bond  names  or  refers  to  no 
specific  limitation  of  the  liability,  and  to  all  cases  in  which 
such  general  phrases  are  used  as  "  during  his  continuance  in 
office,"  or  "  so  long  as  he  shall  be  "  cashier,  teller,  &c.  Of 
course,  if  the  bond  distinctly  declares  its  own  duration,  this 

3  Though  the  bond  do  not  recite  the  term  of  the  office  or  agency,  if  it 
be  one  of  limited  duration,  by  general  statute,  charter,  by-law,  or  terms 
of  appointment,  the  parties  are  still  supposed  to  contract  with  a  reference 
to  the  limited  term,  and  the  sureties  will  not  be  held  answerable  for  the 
misconduct  of  the  principal  beyond  that  term,  upon  a  new  appointment, 
even  though  the  words  of  the  bond  are  that  they  shall  be  responsible  for  the 
principal,  "  at  all  times,  or  any  time  hereafter."  St.  Saviour's  Southwick 
V.  Bostock,  2  New  R.  174;  Hasel  v.  Long,  2  M.  &  S.  363;  Peppin  v.  Cooper, 
2  B.  &  Aid.  431  ;  Barker  v.  Parker,  1  T.  R.  295.  Sureties  on  the  bond  of 
a  cashier  whose  term  of  office  is  annual  are  not  liable  for  defaults  occurring 
after  an  election  the  next  succeeding  year,  and  the  lapse  of  a  sufficient  time 
for  him  to  qualify  by  giving  a  new  bond.   Harris  v.  Babbitt,  4  Dillon,  185. 

78 


PERIOD    COVERED    BY   BOND.  §  27 

is  conclusive  upon  the  question.*  Where  the  charter  prescribes 
an  annual  election  of  directors,  and  that  the  "  directors  for 
the  time  being  shall  have  power  to  appoint  a  cashier,"  the 
tenure  of  office  of  the  cashier  is  not  thereby  rendered  annual. 
But  liaving  been  once  duly  appointed,  by  a  vote  contahiing  no 
express  limitation,  he  will  continue  to  hold  office  by  virtue  of  this 
original  appointment,  cither  until  the  expiration  of  the  charter, 
or  until  his  removal  before  that  time  by  the  directors.^ 

In  a  Delaware  ^  case,  the  charter  gave  directors  power  to 
appoint  cashier,  annexed  no  term  to  the  office,  but  required 
him  to  be  qualified  by  taking  oath  and  giving  bond.    ^^^^^^  ^ 
In  1862  and  1865  he  gave  bond  ;  in  1863  and  1864   Farmers'" 
he  did  not,  though  annually  re-elected.     The  bond 
was  conditioned   for  a  faithful   discharge   of   his   duties   as 
cashier,  no  time  being  named.     The   question  was  whether 
the  cashier's  term  of  office  expired  at  the  new  election,  or 
continued  till  the  cashier  was  qualified  by  a  new  bond.     Tlie 
court  took  the  latter  view,  for  otherwise  there  would  not  be 
a  succession  of  cashiers  qualified  as  required  by  the  charter, 
and  in  the  absence  of  any  express  rule  that  the   office   shall 
expire  ipso  facto  on  a  neiv  election,  it  is  a  reasonable  con- 
struction that  the  old  term  shall  continue  till  the  new  is  duly 
and  properly  entered  on. 

A   similar  rule    was   laid   down  in  the  case   of  Amherst 
Bank  v.  Root,'  in  a  very  clear  and  satisfactory  opinion,  deliv- 
ered by  Chief  Justice  Shaw.     The  statute  provided  that  the 
cashier  should  retain  his  place  until  removed  there-   statutory 
from,  or  until  another  shoidd  be  appointed  in  his   P™^''''^"- 

*  Welch  V.  Seymour,  28  Conn.  387;  State  Treasurer  v.  Mann,  34  Vt. 
371 ;  Dedham  Bank  r.  Chickering,  3  Pick.  335.  See  also  Boston  Hat 
Manufactory  v.  Messinger,  2  id.  223,  and  the  authorities  therein  cited 
and  discussed.  But  it  should  be  remarked  that  Dedham  Bank  v.  Chick- 
ering, though  not  overruled,  was  yet  declared  to  be  of  questionable  sound- 
ness, in  Johnson  v.  Frankfort  Bank,  23  Me.  322. 

5  Union  Bank  v.  Ridgely,  1  liar.  &  G.  413. 

6  Sparks  v.  Farmers'  Bank  of  Delaware,  3  Del.  Ch.  274,  294. 

^  Amherst  Bank  v.  Root,  2  Met.  522.  Judge  Dewey's  dissenting 
opinion  appears  wholly  unconvincing  when  compared  with  that  of  the 
Chief  Justice. 

79 


§  27  OFFICIAL    BONDS    AND    LIABILITIES   OF   SURETIES. 

stead.  Ill  1831,  a  cashier  was  appointed  and  gave  bond  ;  in 
1832,  he  was  reappointed,  and  gave  no  new  bond.  lie  con- 
tinued in  office  several  consecutive  years,  and  in  1836-37 
was  guilty  of  defaults.  His  two  appointments  were  each  ex- 
pressed, on  the  records,  to  be  "  for  the  year  ensuing."  The 
portion  of  the  opinion  which  we  have  occasion  to  rely  upon 
at  present  is  substantially  as  follows  :  This  statutory  provision 
governs  the  tenure  hy  which  the  cashier  holds  office^  which  is 
•'  until  another  is  appointed."  If  he  is  to  hold  the  office,  he 
is  also  to  perform  the  official  duties,  and  a  bond  that  he  shall 
faithfully  perform  the  duties  will  "  include  duties  performed 
after  the  limited  time  for  which  he  is  chosen,  and  during  the 
time  that  the  office  is  continued  by  force  and  operation  of 
law."  Though  the  election  was  expressed  to  be  for  the  year 
next  ensuing,  yet,  the  office  not  being  by  law  annual,  he  held 
it  by  force  of  the  general  law  until  another  should  be  ap- 
pointed in  his  stead.  That  the  directors  hold  by  virtue  of  an 
annual  election  has  no  effect  in  controlling  the  positive  pro- 
vision of  the  law  concerning  the  cashier's  tenure  of  office.  A 
plausible  argument  is,  that  the  fact  of  an  annual  election  is 
evidence  of  a  by-law  or  usage  making  the  office  annual.  But 
the  directors  are  supposed  to  know  the  general  law,  which  de- 
clares that  the  cashier  shall  continue  in  office  till  they  remove 
him.  Their  re-election,  therefore,  amounts  only  to  the  fact 
that  they  wish  to  give  expression  to  their  will  that  he  should 
remain.  His  election  to  an  office  which  he  already  holds,  and 
would  continue  to  hold  without  an  election,  is  only  a  manifesta- 
tion of  their  intent  that  he  should  continue  to  hold.  That  they 
themselves  regard  it  thus,  as  a  continuance  of  an  existing 
office,  not  the  commencement  of  a  new  one,  is  obvious  from 
their  requiring  no  new  bonds.  "  The  cases  where  it  has  been 
held  that  the  generality  of  the  words  of  an  obligation  may  be 
restrained  and  modified  are  of  two  classes ;  (1)  where  there  is 
a  preamble  or  recital,  stating  directly  or  by  implication  the 
intent  and  purpose  of  the  parties  to  the  bond;  or  (2),  where 
it  is  a  stipulation  for  fidelity  in  office,  and  it  appears  by  the 
nature  of  the  constitution  of  the  office  that  it  was  limited  to 
a  particular  time."  In  the  present  case  the  words  are  gen- 
80 


PERIOD    COVERED    DY    BOND.  §  27 

crul  ;  there  is  no  recital ;  the  office  itself  is  not  annual.  That 
the  election  was  "for  the  year  ensuing"  is  answered  by  the 
fact  that  the  law  made  the  office  a  continuing  one  until  the 
incumbent  was  removed,  and  another  chosen  in  his  place  ; 
which  did  not  happen  till  after  the  occurrence  of  the  breaches 
assigned.  Dewey,  J.  dissented,  on  the  ground  that  it  was 
competent  for  the  directors  to  make  the  office  annual,  and 
they  had  done  so  by  their  votes. 

If  no  other  legal  limitation  can  be  annexed  to  the  term  of 
office,  it  might  seem  that  at  least  the  duration  of  the  charter, 
or  the  period  for  which  the  corporation  may  exist  Expiration 
under  the  law  of  its  organization,  must  be  the  ut-  supi'kmentai 
most  time  over  which  the  bondsmen's  liability  could  i''i'J''''y- 
be  extended.  It  is  clear  that  a  renewal  of  the  charter  or  ex- 
tension of  the  period  of  existence  cannot  operate  to  carry  the 
obligation  over  into  the  second  lease  of  corporate  life,  if  the 
charter  limit  is  reached  before  the  renewal.  But  if  the  bank 
does  not  cease  to  exist,  its  existence  being  prolonged  by  an 
act  before  the  limit  of  its  former  term  is  reached,  it  has  been 
held  ^  in  New  Hampshire  that  the  bond  continues,  n^  ^^^  ^^^^ 
The  possibility  of  such  a  prolonging  of  the  cashier's  v  Rogers. 
term  was  within  reasonable  contemplation  at  the  time  the  bond 
was  made.  0.  might  be  cashier  for  a  week  or  for  life,  accord- 
ins:  to  circumstances,  one  of  which  is  such  legislative  action 
as  the  present,  and  the  bond  was  given  for  all  the  time  he 
should  be  cashier. 

The  court  said :  "  The  true  rules  of  law  to  be  deduced 
from  all  the  cases  on  this  subject  are  these.  When  the  term 
of  office  is  limited  to  a  particular  period,  as  a  year  or  five 
years,  and  the  person  appointed  cannot  continue  in  office  for 
a  longer  period  without  a  new  appointment,  then  the  official 
bond,  if  nothing  appear  to  the  contrary,  is  presumed  to  be 
intended  to  be  confined  to  the  particular  term  ;  and  if  the  offi- 
cer be  reappointed  there  must  be  a  new  bond.  But  when  an 
office  is  held  at  the  will  of  those  who  make  the  appointment, 
and  is  not  limited  to  any  certain  term,  then  the  bond  is  pre- 
sumed to  be  intended,  if  nothing  appear  to  the  contrary,  to 

8  Exeter  Bank  v.  Rogers,  7  N.  H.  21. 
VOL.  1.  6  81 


§  27  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES. 

cover  all  the  time  the  person  appointed  shall  continue  in  office 
under  the  appointment.  Thus  a  sheriff  is  appointed  in  this 
State  to  hold  his  ollice  during  the  term  of  hve  years,  and  can- 
not hold  it  beyond  that  term  without  a  new  a])p()intment. 
Tiie  bond  he  gives  does  not  therefore  extend  beyond  the  term 
for  whicli  he  is  appointed.  But  the  deputies  of  the  sheriff 
hold  their  offices  at  the  will  of  the  sheriff,  and  their  bonds 
may  extend  to  any  period  during  which  they  are  continued  in 
office,  notwithstanding  the  sheriff  may  in  the  mean  time  be  re- 
appointed, and  be  compelled  to  give  new  bonds  himself.  These 
rules  arc  founded  in  sound  reason  and  good  sense.  The  pre- 
sumi)tion  which  the  law  makes  as  to  the  intention  of  the  par- 
ties to  the  bond  is  the  natural  presumption  in  both  cases. 
Now  we  are  of  the  ojjinion  that  the  terms  of  the  condition  in 
this  case  are  broad  enough  to  embrace  the  whole  term  during 
which  Rogers  Avas  cashier,  and  that  there  is  nothing  in  the 
form  of  the  appointment,  the  nature  .of  the  office,  the  words 
of  the  condition,  or  the  conduct  of  the  parties,  that  gives  the 
slightest  indication  of  any  intention  in  any  party  that  the 
bond  should  be  limited  to  the  period  mentioned  in  the  original 
charter  as  the  termination  of  the  corporation." 

In  Thompson  v.  Young,^  the  facts  were  these  :  — 

In  the  year  1811,  the  Bank  of  Muskingum  was  incorpo- 
rated, the  charter  to  continue  until  the  1st  of  Janu- 
ary, 1818.  Marple  was  appointed  cashier.  Vanhorn, 
Price,  Thompson,  and  Mclntire  executed  with  ]\[arple,  as  se- 
curities, a  bond  in  the  penalty  of  820,000.  ]Marj)le  proceeded 
to  discharge  the  duties  of  cashier. 

Before  the  1st  of  January,  1818,  the  legislature  extended 
the  charter  until  the  1st  of  January,  1843.  Marple  was  con- 
tinued cashier,  without  either  a  new  appointment  or  a  new 
bond. 

In  1815,  Mclntire,  one  of  the  securities,  died.  In  1819, 
Marple  became  a  defaulter  to  a  large  amount ;  and  suit  was 
commenced  against  Marple,  Vanhorn,  Price,  and  Thompson, 
the  surviving  obligors,  and  judgment  obtained  against  them 
for  the  amount  of  the  defalcation.  At  the  trial,  no  evidence 
®  Thompson  v.  Young,  2  Ham.  334. 

82 


PERIOD   COVERED    BY   BOND.  §  27 

was  given  of  any  default  before  the  1st  of  January,  1818. 
The  court  said  :  "  The  authorities  adduced  by  the  defendants 
are  conclusive  that  the  securities  were  not  bound  for  any  de- 
falcation that  took  place  after  the  expiration  of  the  first  char- 
ter. And  we  hold  them  to  be  in  accordance  with  the  soundest 
principles  of  justice." 

The  chief  authorities  to  which  reference  was  made  were  to 
the  following  effect. 

In  Arlington  v.  Merricke,^''  the  defendant  entered  bonds  as 
security  for  Jenkins,  appointed  deputy-postmaster  for  six 
months.  In  an  action  to  recover  on  account  of  Jenkins's  fail- 
ure in  some  way,  his  counsel,  Saunders,  said:  "The  defendant, 
by  the  intention  of  the  condition,  was  not  to  be  responsible  for 
Jenkins  for  any  longer  time  than  for  the  said  six  months, 
although  the  words  are  that  Jenkins,  during  all  the  time 
that  he  shall  continue  deputy-postmaster,  etc.,  indefinitely, 
shall  observe  and  perform,  etc. ;  yet  this  time,  which  is  in- 
definite in  itself,  ought  to  be  construed  only  for  the  said  six 
months,  for  which  the  condition  recites  that  Jenkins  was  ap- 
pointed to  be  deputy-postmaster,  and  to  which  the  condition 
relates.  And  that  rather  because  Jenkins  cannot  continue 
deputy-postmaster  for  any  longer  time  than  for  the  said  six 
months,  unless  he  be  appointed  anew,  and  have  a  new  deputa- 
tion for  a  longer  time.  And  he  said  that,*by  the  construction 
which  the  plaintiff's  counsel  would  put  upon  it,  the  defendant 
would  be  tricked ;  for  it  appears  that  the  defendant  intended 
to  be  bound  for  Jenkins  for  the  due  execution  of  the  said 
office  only  for  six  months ;  but  the  plaintiff  would  have  the 
defendant  bound  during  the  whole  life  of  Jenkins,  which  is 
unreasonable  to  suppose."  Hale,  Chief  Justice,  said :  "  The 
condition  shall  refer  to  the  recital  by  which  the  defendant 
was  bound  only  for  six  months,  and  not  longer,  and  that  for 
the  reason  above  alleged  by  Saunders." 

A  foot-note  says,  "  This  has  been  considered  a  leading  case 
upon  this  subject  ever  since." 

In  Wright  v.  Russell,"  De  Grey,  C.  J.  said :  "  The  law  is, 

^°  Arlington  w  IMerricke.  2  Saunders,  41i. 
11  Wright  V.  Russell,  2  Black.  934. 

83 


§  27  OFFICIAL    BONDS    AND    LIABILITIES   OF   SURETIES. 

that  the  surety  sliall  not  be  bound  beyond  the  scope  of  his  cn- 
gao-cmcnt,  as  understood  at  the  time  he  entered  into  it.  Who^e 
there  is  the  least  difference  bettveen  the  condition  and  the 
breach  assigned,  the  surety  iviU  not  he  bound.  Here  Wriuht 
takes  a  clerk  wlien  sole,  ■with  security  for  his  good  behaviour 
in  his  service.  He  then,  by  his  own  act,  takes  in  a  ])artncr. 
From  that  moment  the  suretyship  is  at  an  end.  If  there  is 
one,  there  may  be  twenty  partners  taken  in.  Is  the  surety 
liable  if  Baird  disobeys  the  orders  of  any  one  of  these  part- 
ners ?  Or  can  the  surety  be  called  upon  to  insure  the  money 
of  all  the  partners  ?     Certainly  not." 

Bigelow,  Clerk,  etc.  v.  Bridge. ^^  "^i/  the  Court.  The  bond 
in  this  case  appears  to  have  been  given  to  the  plaintiff,  as 
clerk  of  the  peace  for  the  county,  pursuant  to  the  provisions 
of  the  statute  of  1785,  c.  76,  §  1.  But  the  choice  of  county 
treasurer  being  by  that  statute  annual,  it  is  apparent  that  the 
bond  required  by  it  was  intended  for  the  protection  of  the 
public,  so  long  only  as  the  person  chosen  should  continue  in 
office  in  virtue  of  such  election.  A  new  bond  should  regularly 
have  been  taken  for  each  several  year  for  which  the  defendant 
was  elected.  If  this  bond  were  valid  against  the  defendant, 
it  would  be  equally  valid  against  his  sureties  ;  but  they  could 
never  contemplate  their  contract  as  binding  them  thus  indef- 
initely. And  indeed  it  is  to  be  presumed  that  the  plaintiff 
did  not  consider  them  as  held  to  answer  the  present  demand, 
as  he  has  not  joined  them  with  their  principal  in  this  action. 
But  the  principal  in  a  bond  is  no  further  bound  than  his 
sureties." 

It  will  be  observed  that  the  authorities  are  not  precisely  to 
the  point,  since,  so  far  as  they  directly  refer  to  the  limitation 
of  the  surety's  obligation  by  the  term  of  the  principal's  office, 
the  limitation  was  one  inherent  in  the  office  itself.  In  one 
case  the  office  was  annual,  in  the  other  for  the  definite  term 
of  six  months,  which  is  not  exactly  similar  to  the  case  in 
which  they  were  cited,  the  limitation  there  being  not  inherent 
in  the  office,  but  aside  from  it,  —  a  contingency  which  might 
or  might  n6t  affect  the  term  of  the  ])rincipars  office. 

^-  8  Mass.  275. 
84 


PERIOD   COVERED   BY   BOND.  §  27 

Authority  is  clear  that  legislative  re-crcatiou  of  a  deceased 
bank  does  not  infuse  new  life  into  the  bond.^^    In  Pennsylvania 
the  court  declared  that  the  revival  of  the  charter   Bank  of 
after  a  forfeiture  had  been  legally  consummated  by   tYif  r' 'iifr- 
default  of  the  cashier  will  not  operate  to  revive  the   ii"gton. 
obligation  of  the  sureties  on  his  bond. 

"  By  the  constitution  of  this  corporation,  its  existence  was 
subject  to  be  terminated  alike  by  forfeiture  of  its  charter  and 
efflux  of  time  ;  and  for  the  benefit  of  each  of  these  as  limita- 
tions of  the  term  of  their  liability,  the  sureties  had  stipulated, 
not  indeed  in  terms,  but  tacitly,  and  by  irresistible  implication 
from  the  nature  of  the  contract.  They  had  treated  on  the 
basis  of  corporate  existence  as  it  then  stood,  and  in  reference 
to  all  its  incidents.  They  might  have  seen,  and  they  are 
therefore  to  be  considered  as  having  known,  that  the  bank 
was  subject  to  cease  by  the  happening  of  a  contingency,  and 
that  with  it  would  cease  their  liability.  Who  can  say  this  did 
not  enter  into  their  estimate  of  the  risk  which  they  consented 
to  take  on  themselves  ?  They  w^ere,  in  effect,  insurers,  but 
without  a  premium,  of  the  cashier's  fidelity  ;  and  they  were 
entitled  to  the  benefit  of  any  termination  of  the  risk  which 
may  be  brought  within  the  letter  or  the  spirit  of  their  con- 
tract. Their  engagement  was  without  a  consideration  ben- 
eficial to  themselves,  and  it  is  therefore  not  to  be  extended 
beyond  its  strict  technical  import." 

In  this  case  the  forfeiture  was  absolute  and  complete,  when 
the  legislature  came  to  the  rescue,  and  declared  the  bank 
should  come  again  into  existence,  ratifying  the  acts  done  in 
the  interval ;  and  the  court  are  careful  to  state  that  they 
have  not  to  pass  on  a  case  where  the  legislature  had  only 
intervened  to  prevent  the  consummation  of  an  inchoate 
forfeiture. 

That  both  the  officer  and  the  corporate  government  have, 
in  fact,  supposed,  or  have  conducted  themselves  so  that  it 
must  be  assumed  that  they  supposed,  that  the  bond  was  still 
continuing  in  force  after  it  had  in  fact  been  terminated  in 

13  Bank  of  Washington  v.  Barrington,  2Penn.  27;  Thompson  v.  Young, 
2  Ham.  334;  Union  Bank  o.  Ridgely,  1  Har.  &  Gill,  413. 

85 


§  27  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

any  of  the  ways  above  described,  does  not  affect  its  validity, 
or  operate  as  a  waiver  of  its  determination.  The  misappre- 
hension, being  common  to  both  parties,  docs  not  prevent  either 
from  standing'  upon  his  original  rights. 

a.  When  an  ofllicer  has  given  a  bond  in  which  no  express 
limitation  of  time  is  set  to  the  duration  of  the  obligation,  if 
Takiiifca  aitcrwards,  at  the  close  of  a  year  or  other  term 
new  bond.  q£  j^jg  incumbcncv,  he  is  again  appointed,  again 
qualifies,  and  gives  a  new  bond,  —  the  old  appointment  is 
thereby  terminated,  the  obligation  of  the  old  bond  ceases, 
and  no  recovery  can  be  had  against  its  obligors  by  reason 
of  his  subsequent  default.^'*  But  if  there  is  a  special  proviso 
in  the  second  bond  that  it  shall  not  impair  the  obligation  of 
any  previous  bond  until  the  same  shall  have  been  given  up 
and  cancelled,  all  the  bonds  will  still  be  legally  valid,  and 
will  be  equally  available  as  security  against  breaches  until 
such  cancellation  of  the  earlier  ones  actually  takes  place. ^^ 

h.  It  has  sometimes  happened  that  an  officer,  being  re- 
appointed for  a  second  term  of  office,  and  giving  a  new  bond 
for  the  new  term,  is  at  the  very  time  of  his  appointment  a 
defaulter,  though  the  fact  is  unknown  to  all  the  parties  save 
Part  of  the  himsclf.  If,  tlicu,  after  the  reappointment,  he  does 
voncililT'  ^^y  further  wrongful  official  act  in  reference  to  the 
bond  period,  existing  defalcation,  though  only  for  the  purpose 
of  concealing  it,  and  even  though  he  may  not  in  any  man- 
ner increase  its  amount  or  alter  its  nature,  the  sureties  upon 
the  second  bond  will  be  liable. ^^  Whether  or  not  the  sureties 
on  the  first  bond  could  also  be  held,  either  altogether  instead 
of  the  sureties  on  the  second  bond,  or  for  the  purpose  of  mak- 
ing up  the  full  amount  of  the  loss  if  this  could  not  bo  obtained 
from  the  sureties  on  the  second  bond,  is  a  question  upon 
which  the  only  two  authorities  which  we  have  arc  somewhat 
at  variance.  In  the  Indiana  case,  the  officer  misappropriated 
moneys  received  by  him  in  his  second  term  to  make  good  his 
defalcation  in  the  previous  term,  and  the  court  held  posi- 

1*  Johnson  v.  Frankfort  Bank,  23  Me.  322. 
15  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  171. 
le  Ingraham  v.  Maine  Bank,  13  Mass.  208;  Cook  v.  State,  13  Ind.  154. 
^86 


A   WRONG   ONLY   PARTLY   WITHIN    BONDED    PERIOD.         §  29 

tively  that  onli/  the  sureties  for  the  second  term  could  be 
held.  In  the  Massachusetts  case,  the  cashier  had  embezzled 
in  the  first  term  ;  after  his  reappointment,  he  borrowed  money, 
as  cashier,  and  placed  it  in  the  bank  to  meet  an  examination, 
after  which  he  withdrew  the;  amount  from  the  bank  and  re- 
turned it  to  the  lenders.  The  court  said,  although  a  deficit 
existed  prior  to  the  execution  of  the  second  bond,  "  and  which 
may  have  been  covered  by  an  antecedent  bond,"  yet  the  trans- 
action in  the  second  term  was  not  distinguishable  from  an 
actual  payment  from  his  own  funds  to  make  good  the  de- 
ficiency, and  a  removal  afterwards  of  corporate  funds  without 
the  assent  of  the  government.  It  follows  from  these  cases, 
that  it  is  not  necessary  that  the  entire  transaction  creating 
the  liability  should  take  place  within  the  period  covered  by 
the  bond.  The  occurrence  of  any  substantial  part  within  that 
period  is  enough  to  make  the  liability  attach.  A  fortiori, 
therefore,  if  the  whole  of  the  fraudulent  part  falls  within  the 
term  of  the  obligation,  the  obligors  will  be  bound.-' 

§  28.  The  Surety  is  discharged  by  a  Material  Change  in  the 
relations  between  the  officer  and  the  bank,  so  as  to  increase 
the  risk  in  an  important  degree,  or  in  the  identity  of  the 
obligee,  unless  the  change  is  provided  for  in  the  bond. 

For  the  surety  has  a  right  to  judge  for  himself  of  the  cir- 
cumstances under  which  he  is  willing  to  be  liable,  and  they 
cannot  be  materially,  i.  e.  substantially,  changed  without  his 
consent,  unless  the  change  is  manifestly  for  his  benefit. 

§  29.  Identity  of  Banking  Firm.  Where  there  is  a  change 
in  the  banking  firm  to  which  the  obligation  of  the  bond  runs, 
it  will  depend  upon  the  language  of  the  bond  whether  it  will 
enure  to  the  benefit  of  the  new  firm.  It  may  be  so  written 
that  the  obligation  is  to  the  original  firm  and  to  its  succes- 
sors through  any  number  of  subsequent  changes ;  or  it  may 
be  so  written  that  the  obligation  is  only  to  the  individuals 
who  at  the  date  of  the  bond  composed  the  firm.  An  early 
case  touching  upon  this  question  was  that  of  Wright  v.  Russell.^ 

"  State  V.  Van  Pelt,  1  Cart.  004. 

1  §  29.  3  Wils.  530;  2  W.  Bl.  934.  Also  to  the  same  effect  is  Dry  v. 
Davey,  10  Ad.  &  El.  30. 

87 


§  29  OFFICIAL   BONDS   AND    LIABILITIES   OP   SURETIES. 

The  guarantor  in  the  bond  undertook  with  A.  for  the  fidelity 
of  a  clerk  in  A.'s  emplt)y,  so  long  as  he  should  con- 
entity  ost  ^j^^^^  jj^  ^  ,g  service  as  clerk.  Afterward  A.  took 
a  i>artner,  and,  the  clerk  being  in  default,  suit  was  brought  by 
A.  upon  the  bond,  alleging  that  the  clerk  had  received  money 
on  account  of  the  partnership,  and  had  not  paid  it  over. 
But  the  court  held  that  A.  could  not  recover ;  that  the  taking 
of  a  partner  by  A.  put  an  end  to  the  obligation.  The  con- 
dition of  the  obligation  ran  to  A.  alone,  and  the  breach  was 
not  strictly  within  the  condition ;  nor  was  there  anything  to 
show  that  the  surety  intended  to  guarantee  the  clerk's  fidelity 
to  any  other  person  than  A.  This  case  has  been  subjected 
to  much  criticism ;  but  appears  never  yet  to  have  been  di- 
rectly overruled  upon  any  substantially  identical  condition 
of  facts.'^ 

The  directors  of  an  unincorporated  banking  company  merged 
the  association  into  an  existing  corporation  chartered  as  an  in- 
surance and  trust  company,  and  continued  to  do  banking  con- 
trary to  charter.  The  cashier's  bond  was  held  inoperative  by 
the  change.^ 

Yet  in  sundry  cases  the  obligation  has  been  held  to  be 
continuing  where  the  court  felt  able  to  hold  upon  the  facts 
that  the  bankers  were  really  the  same  copartnership  through- 
out the  several  changes.*  Where  the  obligee,  being  a  joint- 
identity  not  stock  banking  company,  received,  after  execution  of 
^°^^-  the  bond,  a  considerable  accession  of  proprietors  and 

capital,  and  thereupon  increased  the  number  of  directors  and 
changed  its  name,  it  was  nevertheless  held  that  the  bond 
continued  a  live  security,  surviving  these  changes,  on  the 
ground  that  the  bank,  not  having  changed  its  constitution 
in  any  respect,  had  preserved  its  identity.^  This  seems  to 
be  the  true  test,  in  theory,  whether  the  obligee  has  lost  or 

2  Barclay  v.  Lucas,  3  Dougl.  321;  1  Term,  291,  n.  Though,  as  would 
appear  by  the  note  at  the  end  of  the  report  of  the  case  in  Douglas,  it 
also  has  not  escaped  question. 

3  Bensinger  v.  Wren,  100  Pa.   St.  500  (1882). 

*  Chapman  v.  Beckington,  3  Q.  B.  722;  Metcalfe  v.  Bruin,  12  East, 
400 ;  Wilson  v.  Craven,  8  M.  &  W.  584. 
6  Metcalfe  c.  Bruin,  12  East,  400. 
88 


CHANGE   IN   THE   OBLIGEE.  §  30 

continued  his  or  its  identity.  But,  as  usual,  the  difiiculty 
lies  in  ai)plying  the  theory  to  the  facts,  and  determining  the 
question  of  continued  identity.  Some  of  the  cases  seem  to 
make  a  break  very  much  easier  of  accomplishment  Uian 
others. 

But  a  bond  requiring  the  clerk  to  account  to  the  banker 
and  his  executors,  administrators,  and  assigns,  does  not  cover 
defaults  committed  subsequently  to  the  obligee's  death  when 
the  clerk  is  in  the  employ  of  the  executors.^ 

§  30.  Change  in  the  Duties  of  the  Officer.  If  the  new  duties 
are  of  a  lower  grade,  and  less  risk  than  the  functions  of  the 
office  guaranteed,  the  surety  is  not  discharged  wholly,  though 
he  may  not  be  liable  for  a  loss  arising  from  such  employment. 
See  §  2G. 

Or  if  the  change,  though  increasing  the  risk,  does  so  in  a 
slight  and  unimportant  manner,  and  is  such  a  variation  as  is 
likely  to  occur  in  the  course  of  business,  it  does  not  avoid 
the  bond,  for  the  surety  is  presumed  to  know  that   fi^sumed 

''  '■  _  assent  of 

the  directors  have  power  to  make  such  regulations  surety. 
and  changes  as  they  see  fit,  and  the  surety  is  presumed  to 
contemplate  such  action,  and  assent  in  advance  to  reason- 
able and  moderate  alterations  in  official  duties ;  otherwise 
the  security  would  be  truly  a  bond  and  fetter  on  the  business 
of  the  bank,  rather  than  an  obligation  upon  the  surety.  But 
if  duties  of  a  higher  grade,  requiring  more  skill,  or  subject- 
ing the  officer  to  greater  temptations,  are  added,  the  surety 
is  discharged,  though  it  may  be  doubted  if  the  rule  is  not 
more  swee[)ing  than  justice  requires.     See  §  17. 

The   language  of   the  bond  may  expressly  refer  to   such 
matters,  or  be  so  broad  and  absolute  as  to  cover   Express 
them.     See  §  26.     We  will  now  consider  the  cases   '*'*'*^"'^- 
that  illustrate  these  rules. 

a.   Assent  to  any  considerable  increase  of  risk  can  never 
be  implied.     The  character  of  the  risk  can  never  be  materially 
altered.    A  book-keeper  may  have  many  more  books   Lower  grade 
given  him  to  keep  than  he  had  at  the  time  of  the   *^"^'^^' 
execution  of  the  bond ;  a  cashier  may  be  deputed  to  act  as 

^  Barker  v.  Parker,  1  Term,  287;  but  see  Strange  v.  Lee,  3  East,  490. 

89 


§  30  OFFICIAL    RONDS    AND    LIABILITIES    OF   SURETIES. 

teller ;  "  for  the  office  of  teller  is  not  higher  than  that  of 
cashier."  Such  changes  do  not  work  substantial  increase  in 
the  bondsmen's  i-isk,  or  an  increase  which  it  can  be  supposed 
that  they  would  have  repudiated,  or  would  have  considered 
unlikely  to  occur,  when  they  entered  into  the  contract  of  in- 
surance, 'i'hc  hook-keeper  is  a  book-keeper  still;  though  he 
has  more  labor,  it  is  of  the  same  nature ;  the  cashier  only 
fuHils  in  person  the  functions  of  a  subordinate,  which  are 
strictly  consistent  with  his  own  office.  But  to  raise  an  as- 
sistant book-keeper  to  the  office  of  teller,  or  to  the  still  higher 
office  of  cashier,  would  assuredly  be  to  vitiate  his  bond  as  a 
security  for  his  good  conduct  and  sufficient  skill  in  his  new 
Higher  grade  itosition.^  It  would  be  absurd  to  take  for  granted 
duties.  |j|^|.  p(^.i.j^Qj|g  willing  to  guarantee  that  a  man  has 

skill  and  ability  enough  to  assist  in  keeping  books,  are  there- 
fore willing  to  guarantee  that  he  has  skill  and  ability  enough 
to  be  the  teller  or  cashier  of  a  banking  corporation ;  equally 
absurd  to  declare  it  to  be  an  implication  of  law  that,  because 
the  same  persons  will  guarantee  his  honesty  in  the  circum- 
stances of  such  moderate  opportunity  and  temptation  to  fraud 
as  he  must  encounter  in  the  book-keeping,  therefore  they  will, 
and  in  fact  do,  guarantee  the  same  honesty  in  the  face  of  the 
vastly  increased  opportunity  and  temptation  held  out  by  the 
duties  of  teller  or  cashier.^ 

A  bank  book-keeper  who,  in  1868,  had  given  bond  for 
faithful  discharge  of  his  duties  as  book-keeper,  was,  in  1870, 
appointed  teller  with  an  increased  salary,  and  in  1879  was 

1  §  30.  Anderson  v.  Thornton,  3  Q.  B.  271.  See  also  Grant  on 
Bankers  and  Banking,  p.  2G0,  and  cases  cited,  lie  there  lays  down  the 
principle,  very  soundly,  that  a  variation,  without  assent  of  surety,  which 
may  amount  to  substituting  a  new  for  the  old  agreement,  is  an  absolute 
discharge  of  the  surety.  This  is  sound,  and  accords  with  the  text,  though 
Grant's  further  designation  of  any  variation  "  which  may  prejudice  "  the 
surety  ought  in  our  view  to  have  been  rather  more  nariowly  restricted,  as 
by  limiting  it  to  cases  of  substantial  prejudice,  or  to  prejudice  of  that  kind 
or  degree  which  the  surety  could  not  have  been  reasonably  expected  to 
contemplate  as  a  jwssibility  when  he  entered  into  the  undertaking. 

2  Minor  i'.  Mechanics'  Bank,  1  Pet.  46;  Rochester  Hank  v.  Elwood,  21 
N.  Y.  88. 

90 


CHANGE   IN    officers'    DUTIES.  §  31 

a  defaulter.  Held,  that  the  bond  did  not  cover  the  defalca- 
tion.-'^ 

Words  are  sometimes  added  to  the  effect  that  the  officer 
shall  perform  all  the  "  duties  of  the  said  office  which  may  be 
prescribed  by  the  directors."  These  words  clearly  enlarge, 
rather  than  restrict,  the  responsibility  of  the  sureties,  and 
distinctly  anticipate  that  additional  duties  may  bo  ini{)osed 
durint;-  the  term  of  the  suretyship,  and  will  be  included  within 
its  })rotection.  But  evidently  these  additional  duties  must  be 
consistent  with  the  functions  of  the  office  named ;  or,  if  not 
consistent,  they  must  at  least  be  of  a  lower  grade  and  a  less 
risk.  A  teller  could  not  be  made  a  director,  nor  could  a 
book-keeper  be  made  a  president,  and  still  remain  guaran- 
tied by  this  bond,  by  virtue  of  the  enlarging  power  of  this 
phrase."* 

A  cashier's  bond  was  conditioned  to  secure  the  faithful 
discharge  of  "  all  his  duties  as  clerk  of  said  bank,"  also  for 
protection  against  his  misappropriation  of  any  funds  of  the 
bank  might  "  come  under  the  care  or  control  of  said  cashier 
as  clerk."  It  was  in  evidence  that  the  cashier  performed  to 
some  extent  the  duties  of  teller;  also  that  this  was  contem- 
plated to  be  included  in  the  phrase  "  duties  as  clerk."  It 
was  held  that  the  sureties  on  the  bond  were  not  entitled  to 
a  ruling,  as  matter  of  law,  that  there  had  been  such  a  change 
in  the  duties  of  the  clerk  as  would  discharge  them  from  lia- 
bility for  his  wrongful  appropriation  of  funds.^ 

§  31.  Increase  or  Reduction  of  Salary.  (See  §  17.)  —  A  clerk 
was  paid  by  salary  at  the  time  of  the  giving  of  the  bond,  and 
afterward  it  was  arranged  that  he  should  be  paid  by  com- 
missions, which  gave  him  a  larger  return  than  his  salary, 
and  it  was  held  that  the  surety  was  thereby  discharged  from 
further  liability.^  And,  so  again,  where  a  clerk,  in  consider- 
ation of  having  his  salary  raised,  agreed  to  become  liable  to 

8  National  Mechanics'  Banking  Association  v.  Conklin,  24  Hun,  49G 
(1881). 

*  Durkin  v.  Exchange  Bank,  2  Patt.  &  H.  277. 

s  Rollstone  National  Bank  v.  Carleton,  136  ]\Iass.  226. 

1  §  31.  Northwestern  Railway  Company  v.  Whinray,  10  Exch.  77. 

91 


§  32  OFFICIAL   BONDS    AND    LIABILITIES   OP   SURETIES. 

bear  one  fourth  part  of  all  losses  on  the  discounts  made  by 
the  bank,  it  was  held  that,  from  the  date  of  this  new  arrange- 
ment, the  surety  was  discharged.^ 

There  does  not  seem  to  be  much  reason  in  the  former  of 
these  decisions,  nor  is  our  respect  for  it  increased  when  we 
find  a  reduction  of  salary  held  not  to  discharge  the  surety's 
obligation.^  Surely  one  would  think  a  reduction  of  salary 
more  likely  to  lead  to  negligence  in  labor,  or  to  dishonesty, 
than  an  increase  of  salary,  though  the  court,  in  the  first  case 
cited,  thought  otherwise. 

In  the  second  case  the  liability  assumed  by  the  clerk  is  a 
much  more  substantial  ground  for  discharge  than  the  increase 
of  salary,  for  a  new  liability  might  give  occasion  for  stronger 
tem{)tation  to  cover  it.  So  common  and  unsubstantial  a  change 
as  to  its  effect  on  the  risk  seems  a  very  unsatisfactory  ground 
of  avoiding  the  bond.* 

§  32.  An  Increase  of  Capital  Stock  may  be  considered  a 
fact  within  the  contemplation  of  the  surety,  and  though  a 
change  of  risk,  it  is  a  change  of  such  nature  as 
Surety  not  may  happen  at  any  time  in  the  course  of  business 
ist  large  .  ^^^  ^^^^  accumulation  of  deposits.  This  is  the  opin- 
ion of  Delaware.^  The  court  rest  their  decision  on  the  simple 
statement  that  there  had  been  no  enlargement  of  the  cashier's 
duties  ;  that  "  the  sphere  of  his  duties  was  the  same,  although 
the  subject  matter  of  his  charge  might  be  increased,  which  is 
no  more  than  what  happens  from  day  to  day  from  fluctua- 
tions in  the  amount  of  deposits." 

In  Massachusetts,  the  court  consider  that  to  hold  the  sure- 
ties after  the  increase  would  be  to  extend  and  enlarge  their 
liability .2     In  tlie  Delaware  case  the  cashier's  bond  did  not 

2  Bonav  v.  INIacdonald,  3  II.  L.  Cas.  22G. 

8  Frank  v.  Edwards,  10  Exch.  81. 

*  Increase  of  commissions  of  agent  held  not  to  invalidate  bond.  Smith 
V.  Addison,  5  Cranch,  623;  People  v.  Vilas,  30  N.  Y.  459;  Amicable  Ins. 
Co.  V.  Sedgwick,  110  Mass.  1G3. 

^  §  32.  Bank  of  Wilmington  &  Brandywine  r.  Wollaston,  3  Ilarr.  16. 

2  Grocers'  Bank  v.  Kingman,  IG  Gray,  473.  It  seems  just  that  the 
bondholders  should  not  be  held  in  any  case  not  clearly  within  their  con- 
tract, but  Mr.  Burge,  in  his  work  on  Suretyship  (p.  G4G),  says  the  words 
92 


EFFECT  OF  INCREASE  OF  CAPITAL.  §  32 

cover  loss  by  his  mistake  ;  in  the  Massachusetts  case   ^^^^ 
it  did  ;  and  it  was  considered  obvious  tliat  the  chance    Surety  dis- 
of  mistake  was  increased   by  enlargement  of  the 
capital.     If  the  chance  of  loss  by  mistakes  of  greater  number 
or  magnitude  released  the  surety  in  Massachusetts,  it  may  be 
difficult  to  imagine  why  the  increased  temptations  of  larger 
business  should  not  have  had  the  same  effect  in  Delaware ; 
in  other  words,  the  difference  of  facts  in  the  cases  seems  insuf- 
ficient to  explain  the  contrariety  of  the  decisions. 

It  may  well  be  argued,  that  a  surety  might  be  willing  to 
guarantee  0.,  in  a  bank  with  a  small  capital,  and  the  fluctu- 
ations of  deposits  likely  in  such  a  bank,  and  yet  be  unwilling 
to  guarantee  him  in  a  bank  with  a  larger  business;  for  al- 
though he  in  any  case  contemplates  fluctuations,  the  argu- 
ment of  Delaware  is  not  entirely  satisfactory,  for  contracting 
in  reference  to  fluctuations  in  the  business  of  a  bank  with 
a  small  cai)ital  does  not  cover  a  change  of  the  line  round 
which  the  variations  are  grouped,  —  an  elevation  of  their  centre 
of  gravity.  A  man  may  stand  in  the  waves  at  low  water,  who 
would  be  overwhelmed  by  the  billows  of  the  higher  tides. 

On  the  other  hand,  it  is  not  every  increase  of  liability  that 
can  avoid  a  bond ;  else  each  new  deposit,  or  temporary  ab- 
sence of  a  superior  officer,  would  have  that  result.  The  true 
question  seems  to  be.  Is  the  enlargement  such  as  was  within 
the  reasonable  contemplation  of  the  parties  at  the  time  of 
making  the  bond  ? 

And  as  the  increase  of  capital  is  one  of  the  bank's  well- 
known  powers,  set  down  in  its  organic  law,  and  quite  fre- 
(juently  exercised,  it  would  be  hard  to  imagine  on  what  ground 
it  could  be  said  not  to  be  contemplated. 

Still,  the  just  principle,  that  in  case  of  doubt  the  surety 
should  be  favored,  not  the  bank,  urges  decision  in  the  oppo- 
site direction,  and  perhaps  the  best  rule  on  reason  and  au- 
thority is,  that  any  substantial  increase  of  risk,  7iot  expressly 

of  the  bond  are  to  be  construed  strictly  against  the  surety,  for  they  are 
his  words.  This  rule  is,  however,  a  mere  lifeless  formula,  that  is  only 
used  by  the  courts  when  they  can  see  no  other  way  to  sustain  the  inter- 
pretation tlipy  think  just,  or  when  no  other  reason  applies. 

93 


§  33  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES. 

provided  for,  or  necessarili/  incident  to,  the  bank's  business  as 
ordinarily  carried  on,  will  discharge  the  surety.     See  §  17. 

§  33.  Unreasonable  Retention  of  the  Officer  after  discovery 
of  his  defalcation  will  (perhaps)^  discharge  the  sureties  as 
to  any  subsequent  breach  of  the  bond. 


"  §  33.  A  comparison  of  this  section  with  §  37  will  disclose  the  fact,  that, 
while  the  surety  is  not  discharged  by  direct  command  of  tiie  directors  to  do 
See  the  Mass  ^"  unlawful  act,  yet  he  is  supposed  to  be  released  by  neglect 
case  cited  §38,  of  the  directors  to  discharge  or  suspend  the  officer  with  rea- 

and  Minor  v.  .         .  ,     . 

Mechanics'  souable  despatch.  The  question  in  both  is  substantially  this : 
eiidof  §37,  Is  the  bank  to  lose  its  remedy  against  the  cashier's  bondsmen 
and  §  It  a.  ^^^.  ^^^y  breach  of  the  condition  of  the  bond,  because  some  other 
officer  of  the  bank  is  also  in  fault  ?  The  surety  does  not  agree  to  indemnify 
provided  the  other  officers  conduct  themselves  properly,  but  if  O.  conducts 
himself  improperly.  If  the  stockholders  become  aware  of  O.'s  defalcation, 
and  do  not  act  in  the  premises,  that  might  relieve  the  surety  from  future 
liabilit}-;  but  the  directors  are  not  the  bank,  and  if  their  wrongful  con- 
duct in  commanding  or  connivance  with  a  dishonest  act  of  the  cashier 
does  not  deprive  the  bank  of  its  remedy  against  the  surety,  on  what 
ground  would  their  connivance  with  a  second  wrong,  knowing  of  a  prior 
offence,  or  the  less  fault  of  neglecting  to  discharge  O.,  operate  to  release 
the  surety?  True,  it  may  be  argued  that  the  bank  intrusts  the  super- 
intendence of  the  cashier  and  subordinates  to  the  directors,  and  must  be 
bound  by  their  conduct  in  the  matters  given  into  their  charge;  but  such 
an  argument  applies  to  all  the  cases  of  §  37,  as  well  as  to  those  of  §  33. 
It  has  been  declared  that  mere  negligence  in  examining  tlie  accounts  of  a 
cashier  is  no  release  of  his  sureties.  Black  v.  Ottoman  Bank,  10  W.  R. 
871 ;  Atlas  Bank  v.  Brownell,  0  R.  I.  168.  In  Amherst  Bank  v.  Root, 
2  Met.  .522,  C.  J.  Shaw,  says,  "The  idea  that  the  cashier  is  excused  by 
the  act  or  negligence  of  the  directors  arises  from  considering  the  board  of 
directors  as  the  corporation,  and  then  applying  the  very  equitable  princi- 
ple, that  one  ought  not  to  recover  of  a  surety  damages  caused  by  himself. 
We  think  the  principle  does  not  apply."  The  board  is  not  the  corpora- 
tion in  such  matters.  To  hold  it  so  would  defeat  the  very  object  of  the 
bond.  See  United  States  v.  Kirkpatrick,  9  Wheat.  720;  Minor  v.  Me- 
chanics' Bank,  1  Pet.  40;  Farmington  v.  Stanley,  60  i\Ie.  472;  Tapley  v. 
Martin,  116  Mass.  275.  Xo  negligence  of  those  with  whom  rests  the  duty 
of  supervision,  short  of  a  virtual  connivance  at  the  official  delinquency, 
or  a  wilful  shutting  of  the  eyes  to  the  fraud  about  to  be  committed,  can 
release  a  surety.  Dawson  v.  Lawes,  Kay,  280.  See  Story's  Eq.  Jur.  §  325. 
It  is  to  be  noted  that  these  decisions  are  negative ;  do  not  say  even  that 
fraud  would  discharge  the  surety,  but  that  nothing  less  can,  and  especially 
that  the  fraud  of  which  they  speak  as  possibly  able  to  release  is  the  fraud 

94 


RETENTION   OP   DEFAULTER.  §  33 

A  reasonable  time  is  allowed  for  the  directors  to  assemble 
and  act  in  the  premises.  But  if  misconduct  is  suspected,  or 
even  actually  discovered,  and  the  directors  are  satisfied  at 
first  only  to  suspend  the  wrong-doer  temporarily  from  the 
exercise  of  his  functions,  and  pass  a  vote  to  that  effect,  the 
liability  of  the  bondsmen  still  continues  until  the  suspension 
is  actually  effected.  At  least  this  is  the  case  if  there  is  no 
unnecessary  or  unreasonable  delay  in  carrying  the  suspension 
into  effect.^  For  though  the  continuance  in  office  by  the  di- 
rectors of  an  official,  whom  they  know  to  be  dishonest  and 
unfit  for  his  post,  may  have  the  effect  of  vitiating  the  obli- 
gation of  his  bond  as  a  security  for  his  defaults  occurring 
after  the  knowledge  and  continuance  in  office,^  yet  a  suspen- 
sion is  not,  in  fact,  a  continuance  in  office.  The  directors 
have  a  right  to  take  this  step  first,  for  the  purpose  of  gaining 
time  for  more  elaborate  investigation  and  deliberation.  If 
they  take  it  with  due  promptitude,  it  is  enough.  For  the 
guilty  party  is  as  incompetent  to  do  acts  which  will  place 
his  bondsmen  under  any  further  liability  when  he  is  sus- 
pended, as  when  he  is  absolutely  dismissed.  But  the  neglect 
of  the  directors  either  to  suspend  or  to  remove  the  officer, 
after  they  have  become  aware  of  his  dishonesty  or  incom- 
petence, will  not  relieve  the  sureties  from  the  liability  which 
had  already  accrued  for  breaches  which  had  been  consum- 

of  the  person  interested,  not  of  his  agents.      See  on  this  subject  Tapley  v. 
Martin,  110  Mass.  276;  Graves  v.  Lebanon  Bank,  10  Bush,  (Ky.)  23. 

The  weight  of  authority  and  reason  seems  heavily  against  releasing 
the  surety  because  of  the  directors'  fault,  unless  it  is  so  expressed  in  the 
bond,  or  the  organic  law  contains  some  provisions  touching  such  matters, 
which  may  therefore  be  considered  as  contemplated  in  the  contract  of 
suretyship.  Section  33  has  no  decision  to  rest  upon  that  goes  to  the 
point,  but  the  law  was  stated  as  in  §  33,  without  the  "  perhaps,"  by  Mr. 
Morse,  and  is  retained  by  the  editor  in  respect  to  his  opinion. 

1  M'Gill  V.  Bank  of  United  States,  12  Wheat.  511. 

2  This  doctrine  is,  perhaps,  to  be  fairly  implied  from  the  language  of 
the  court  in  Taylor  v.  Bank  of  Kentucky,  2  J.  J.  Marsh.  568;  which, 
however,  only  holds  directly  that  the  retaining  an  officer  in  office  after 
knowledge  of  his  default  does  not  exempt  the  surety  from  liability  for  all 
defaults  prior  to  the  knowledge  and  retention.  Also  arguendo  in  Franklin 
Bank  v.  Cooper,  36  Me.  179.     See  note  0,  above. 

95 


§  35  OFFICIAL    BONDS    AND    LIABILITIES    OF   SURETIES. 

mated  prior  to  the  time  \vlien  the  directors  acquired  such 
knowledge.^     It  only  annuls  the  bond  for  the  future. 

§  34.  Satisfaction  received  by  the  bank  is  a  good  defence. 
But  a  payment  will  be  applied  to  known  defalcations  in  pref- 
erence to  those  unknown,  though  prior. 

The  cashier,  who  had  given  a  bond  with  sureties,  embezzled 
money  to  the  amount  of  84,000.  The  cai)ital  stock  of  the  bank 
Grocers'         was  afterward  increased,  the  embezzlement  romain- 

Bank  i'. 

Kin-man.  Hig  uudiscovcrcd.  The  cashier  continued  in  office, 
and  no  new  bond  was  required.  He  continued  his  embezzle- 
ments upon  a  much  more  extensive  scale  after  the  increase  of 
the  corporate  capital.  At  last,  being  detected,  he  turned  over 
to  the  bank  assets  to  the  value  of  820,000.  The  bank  sued  the 
sureties  to  recover  the  deficit  which  still  existed.  The  court 
ruled  that  the  increase  of  capital  put  an  end  to  the  liability  of 
the  sureties  from  that  time  forth.  The  sureties  then  claimed 
that  the  payment  made  by  the  cashier  should  be  appropriated 
first  to  the  discharge  of  his  earliest  embezzlements,  by  which 
means  the  sum  of  $4,000  embezzled  by  him  prior  to  the  increase 
of  capital  would  be  restored,  and  the  sureties  would  practically 
escape  without  loss.  But  the  court  said,  that  "  inasmuch  as 
that  embezzlement  (of  the  84,000)  was  not  known  to  the 
bank  when  the  conveyance  Avas  made  (by  the  cashier),  and 
the  purpose  of  the  conveyance  was  to  cover,  as  far  as  it 
would,  the  known  defalcations  of  the  cashier,  ...  the  sure- 
ties arc  not  entitled  to  have  that  property  apjilied  in  discharge 
of  their  liability.  The  property  was  neither  conveyed  nor  re- 
ceived for  that  purpose."  ^ 

§  35.  The  Statute  of  Limitations  usually  requires  suits  on 
cashier's  bonds  to  be  brought  within  two  years  after  the 
cause  of  action  arose.  In  suit  upon  a  bond,  whereby  the 
cashier  was  obliged  to  make  and  give  full  satisfaction  and 
recompense  to  the  bank  for  all  moneys,  bills,  notes,  and 
effects  which  should  come  to  his  hands,  it  was  held  that  the 
cause  of  action  did  not  accrue  at  the  date  of  any  defalcation 
or  embezzlement,  or  other  act  protected  against,  but  that  it 

8  State  Bank  v.  Chetwood,  3  Ilalst.  1. 

^  §  34.  Grocers'  Bank  v.  Kingman,  16  Gray.  473. 

96 


STATUTE   OF   LIMITATIONS.  §  37 

be  accrued  wlieii  the  cashier,  ui)on  quitthig  his  office,  failed  to 
make  a  full  delivery  of  the  funds  received  by  him ;  and  from 
this  latter  date  the  statute  began  to  run.^  If  the  bank  had 
previously  become  aware  of  the  defalcation  no  doubt  the  stat- 
ute would  have  begun  to  run  from  the  time  of  knowledge  of 
the  cause  of  action. 

§  3G.  Revocation. — A  surety  may  at  pleasure  revoke  his 
guaranty  upon  reasonable  and  proper  notice,  the  circum- 
stances being  such  that  the  bank  can  dismiss  the  officer  with- 
out injury  to  itself  if  he  should  fail  to  provide  new  sureties, 
unless  the  bond  is  on  a  continuing  consideration  the  benefit 
of  which  the  surety  cannot  or  does  not  renounce,  or  it  was 
made  to  cover  a  transaction  not  yet  completed.^ 

In  England,  however,  it  has  been  held  that  a  guaranty 
under  seal  cannot  be  revoked  without  the  aid  of  equity.^ 

But  notification  by  one  surety  that  he  desires  to  be  released 
does  not  affect  the  liability  of  the  others.^ 

§  37.  No  Act  of  the  Directors  in  violation  of  their  duty  to 
the  stockholders  can  discharge  the  surety  on  the  bond  of  a 
bank  officer.^     See  §  33,  note  0,  and  §  38. 

It  is  no  excuse  that  the  defalcation  was  accomplished  by 
the  exercise  of  a  power  unlawfully  conferred  by  the  directors 
upon   the  defaulting  officer.     Thus,  where  a  bank   Penn. 
authorized  its  teller  to  issue  due-bills,  but  had  no   other  officer 
lawful  power  to  issue  such  bills  or  clothe  him  with   "o^/q*;"^® 
such  authority,  and   he  accomplished  his  defalca-   fault. 

1  §  35.    Bank  of  Wilmington  &  Brandywine  v.  Wollaston,  3  Ilarr.  90. 

^  §  3(5.  1  Parsons  ou  Contracts,  515.  And  see  Le  Rose  v.  Logansport 
National  Bank,  102  Ind.  332  (1885).  Surety  may  revoke,  without  cause, 
on  proper  notice  seasonably  given,  etc. 

2  Bostwick  V.  Van  Voorhis,  91  N.  Y.  353. 

1  §  37.  Minor  v.  Mechanics'  Bank,  1  Pet.  46.  It  is  no  defence  that  a 
cashier  has  done  a  dishonest,  irregular,  or  improper  act,  under  the  express 
direction  of  the  board  of  directors,  if  he  knew  that  their  purpose  in  pro- 
curing the  act  to  be  done  was  wrongful.  He  is  bound  to  obey  them, 
doubtless,  and  it  may  be  that  he  would  have  rejected  any  participation  in 
the  profits  of  their  scheme.  But  neither  his  duty  of  obedience,  nor  his 
intention  to  keep  his  own  hands  clear  from  their  illicit  gains,  are  a  justi- 
fication or  excuse  for  his  connivance.  The  guilt  that  is  in  the  act  leavens 
its  entirety. 

VOL.  I.  7  97 


§  37  OFFICIAL   BONDS    AND    LIABILITIES   OF   SURETIES. 

tions  by  issuing  clue-bills  for  his  own  benefit,  it  was  held  tliat 
the  surety  eould  not  avail  himself  of  this  illegality  in  defence 
to  a  suit  on  his  bond,  and  could  not  set  up  that  the  bank 
could  not  be  compelled  to  pay  the  bills.^ 

If  a  cashier  permit  a  transfer  of  stock  to  be  made  to  the 
bank  beyond  the  amount  permitted  by  the  charter,  he  and  his 
sureties  are  answerable  to  the  stockholders  on  his  bond  for 
any  loss  caused  thereby,  although  such  transfer  was  author- 
ized by  a  resolution  of  the  directors  ;  ^  and  so  if  he  permit 
overdrafts  without  special  excuse.^ 

The  fact  that  the  cashier  consented  to  the  book-keeper's 
application  to  his  own  use  of  money  not  due  him  constitutes  no 
defence  to  an  action  on  the  book-keeper's  bond.^ 
This  is  an  ably  argued  case,  and  Henry,  J.  dis- 
sented, quoting  Bissell  v.  First  National  Bank,  69  Pa.  St.  419, 
and  Caldwell  v.  National  Mohawk  Valley  Bank,  64  Barb.  333. 

The  mere  fact  that  the  directors  sanctioned  overdrafts,  will 
not  release  the  liability  of  a  teller's  sureties  for  the  conse- 
quent loss.^ 

The  culpable  neglect  of  the  directors  and  agents  of  a  bank 
to  make  frequent  examinations  of  the  affairs  of  the  bank,  to 
count  the  money,  and  generally  to  watch  over  its 
concerns,  according  to  the  direction  of  the  by-laws, 
is  no  defence  to  the  sureties  in  a  suit  on  an  official  bond.  The 
negligence  of  one  agent,  or  set  of  agents,  cannot  deprive  the 
corporation  of  its  remedy  for  the  default  of  another  agent.'^ 

Indeed,  no  act  or  vote  of  the  directors  of  a  bank,  contrary 
U.S. Sup. ct.  to  their  duties,  and  in  fraud  of  stockholders'  rights 
Mechanics'  ^^^^  interests,  will  excuse  the  cashier  or  liis  sureties 
Bank.  from  a  violation  of  the  stipulation  in  his  bond,  well 

and  truly  to  execute  the  duties  of  his  office.^ 

2  Wayne  v.  Commercial  National  Bank,  52  Pa.  St.  343  (18G6). 

*  Bank  of  Washington  v.  Barrington,  2  Penn.  29. 

*  Bank  of  St.  Mary's  v.  Calder,  3  Strobh.  Law,  408. 
6  Chew  V.  Ellingwood,  86  Mo.  260  (1885). 

®  Market  Street  Bank  v.  Stampe,  2  Mo.  App.  545. 
'  Amhprst  Bank  v.   Root,  2  Met.  541;  but  see  People  v.  Jansen,  7 
Johns.  332. 

8  Minor  r.  Mechanics'  Bank,  1  Pet.  46. 

98 


FAULT   OF   OTHER    OFFICER   NO    DEFENCE.  §  38 

§  38.  Negligence  of  the  Directors  ill  supervision  or  failing  to 
discover  a  defalcation  docs  not  discharge  the  surety  as  to  sub- 
sequent frauds  ;  ^  but,  as  we  have  seen,^  careless  misrej)resen- 
tations  in  ignorance  of  defalcation  that  due  diligence  would 
have  disclosed,  constitute  a  defence  if  the  surety  was  misled 
thereby. 

On  the  bond  of  a  cashier  of  a  bank  "  faithfully  and  hon- 
estly to  discharge  his  duties  as  such  cashier,  and  faithfully 
ap])ly  and  account  for  all  such  moneys,"  <fcc.,  "  and 
return  the  same,  on  proper  demand,  to  the  order 
of  the  board,"  <tc.,  he  and  his  sureties  are  liable  for  a  loss 
caused  by  his  negligence,  though  the  directors  did  not  use 
due  diligence.^ 

It  is  no  defence  to  a  suit  against  the  sureties  on  the  bond 

of  a  bank  cashier,  that  the  directors  neglected  their 

u.  s. 
duty  in  not  discovering  that  which  the  sureties  cove- 
nanted the  cashier  should  reveal.* 

A  person  had  been  book-keeper,  and  in  that  position  had 
committed  frauds,  which  had  never  been  detected.  He  was 
raised  to  the  position  of  cashier,  and  as  such  fur- 
nished a  bond,  with  sureties,  for  the  faithful  perform- 
ance of  his  duties.  He  continued,  however,  to  commit  frauds 
of  a  like  general  character  with  those  previously  committed  by 
him  as  book-keeper.  Held,  that  in  a  suit  by  the  bank  to  re- 
cover from  the  sureties  on  the  bond  for  the  frauds  committed 
during  the  cashiership,  it  could  not  be  shown  in  defence  that 
the  frauds  committed  by  him  as  book-keeper  would  have  been 
discovered  had  the  officers  of  the  bank  not  been  grossly  dere- 
lict in  the  examination  of  the  books  of  the  bank.  "  The  object 
of  the  bond  is  to  guarantee  to  the  bank  the  faithful  performance 
by  the  cashier  of  his  duties.  His  duties  and  obligations  are 
not  affected  by  the  negligence  of  the  other  officers  or  agents 
of  the  bank,  and  such  negligence  does  not  discharge  his  sure- 

1  §  38.    See  Chew  v.  Ellingwood,  86  Mo.  260  (1885),  and  see  §  37. 

2  S  21  b. 

8  Batchelor   v.    Planters'   National   Bank    of   Louisville,   78    Ky.   435 
(1880). 

*  Frelingliuj'sen  v.  Baldwin,  10  Fed.  Rep.  452. 

99 


§  41  OFFICIAL    BONDS    AND    LIABILITIES    OF    SURETIES. 

ties."  It  is  also  a  qucere  whether,  if  the  olTicers  of  the  bank 
had  had  knowledge  of  the  frauds  of  the  principal  as  book- 
keeper, and  had  failed  to  communicate  such  knowledge  to  the 
sureties  on  his  bond  as  cashier,  these  sureties  would  thereby 
have  been  discharged.^  To  decide  such  a  qucere  against  the 
sureties  would  be  a  great  hardship  upon  them,  not  easily 
capable  of  justification. 

§  39.  Ultra  Vires  action  by  the  bank  is  no  defence,  as  if  the 
bank  commenced  oj)erations  contrary  to  charter,  or  has  failed 
to  perform  its  jjublic  duties,  as  in  reference  to  redeemi;ig  its 
notes.^ 

§  40.  Effect  of  Failure  to  take  the  Required  Oath.  —  The 
fact  that  the  officer  did  not  take  the  oath  of  office  which  was 
required  by  statute  prior  to  entering  upon  the  exercise  of  his 
functions,  does  not  operate  to  vitiate  his  bond.  Being  one  of 
the  duties  prescribed  for  him  to  do,  his  neglect  to  do  it  may 
be  itself  a  breach  of  the  condition  of  the  bond.^  And  so  far 
as  it  is  a  breach  of  the  duty  of  the  directors,  it  is  covered  by 
the  principles  of  §  38. 

§  41.  Express  Limitation  of  Risk.  —  If  the  bond  stipulates 
that  a  certain  sum  only  shall  be  left  in  the  custody  of  the 
clerk,  and  a  larger  sum  be  left,  the  bond  is  not  thereby 
avoided.  The  nomination  of  the  sum  will  be  construed, 
unless  clearly  otherwise  expressed,  to  be  a  limitation  of  the 
liability  of  the  surety.^ 

The  j)rinciples  of  §§  37  and  38  apply  in  such  cases,  and 
the  rule  that  the  substantial  object  of  the  bond,  namely, 
indemnity  against  loss  by  fault  of  the  officer  under  the  cir- 
cumstances of  ordinary  business  in  his  office,  will  be  kept 
in  mind,  and  the  bond  so  construed  as  to  make  it  available 
to  this  end,  unless  the  limitations  are  so  clearly  adverse 
that  they  wnll  not  bear  a  construction  in  harmony  with  that 
rule. 

^  Tapley  v.  Martin,  116  Mass.  275;  see  United  States  v.  Kirkpatrick, 
9  Wheat.  720;  Inhabitants  of  Farmington  v.  Stanley,  60  Me.  472. 
^  §  39.     Hughes  v.  Bank  of  Somerset,  5  Litt.  45.     See  §  722. 
1  §  40.     State  Bank  v.  Chetwood,  3  Halst.  1. 

*  §  41.     Lindsay  i'.  Lord  Downes,  2  Ir.  Eq.  307.    See  the  cases  in  §42. 
100 


PROCEDURE   IN    BOND    CASES.  §  42 

§  42.    Notes  on  Evidence,  Measure  of  Damages,   and   Practice 
AND  Pleading  in  general. 

(a)  Evidence. —  1.  In  a  suit  to  recover  a  deficiency  in  money,  or  the 
value  of  securities  which  ought  to  be  but  are  not  forthcoming,  it  is 
sufficient  for  the  bank  in  the  first  instance  to  allege  and  prove  that  they 
came  into  the  hands  and  possession  of  the  officer,  and  have  not  since 
been  returned  or  accounted  for  by  him.  These  facts,  laid  in  the  declara- 
tion and  satisfactorily  estaVjlished  on  the  trial,  suffice  to  create  a  pre- 
sumption that  the  missing  property  has  been  wasted  or  misappropriated 
by  the  officer.  If  the  deficiency  is  in  the  money,  or  uninvested  funds 
of  the  bank,  it  is  not  necessary  for  the  bank  to  declare  or  to  prove  the 
receipt,  at  certain  times,  of  specific  sums  by  the  cashier,  from  indi- 
viduals named,  and  to  allege  these  particular  sums  to  have  been  since 
lost  or  converted.  Obviously  this  would  be  at  once  a  useless  and  an 
impossible  requirement.  All  the  sums  paid  into  the  bank  are  usually 
blended  into  one  aggregate  mass,  and  the  waste,  loss,  or  embezzlement  in 
the  great  majority  of  cases  takes  place  from  this.  If  at  any  time  an 
officer  should  lose  or  embezzle  the  whole  of  any  especial  sum  taken  by 
him  at  one  time  from  an  individual,  it  would  probably  be  totally  impos- 
sible for  the  bank  to  assure  itself  of  the  fact.  Consequently  it  is  incum- 
bent upon  the  bank  to  allege  and  prove  simply  that  the  officer  has  received 
a  certain  amount  as  a  sum  total,  and  that  he  has  returned  or  accounted 
for  a  less  amount,  likewise  as  a  sum  total.  If  then  the  defendants  seek 
to  rebut  the  presumption  of  his  liability  for  the  difference  which,  unless 
they  do  so,  becomes  conclusive  and  supports  a  judgment  against  them, 
the  burden  is  shifted  upon  them  to  allege  and  show  that  the  deficiency 
occurred  in  some  manner  such  as  to  relieve  them  from  a  liability,  under 
the  bond,  to  make  it  good.  If  to  this  end  they  intend  to  rely  upon  the 
innocent  mistake  of  the  officer,  or  upon  a  robbery  from  him,  either  of 
which  is  a  sufficient  defence,  (Walker  v.  British  Guaranty  Association,  18 
Q.  B.  277,  also  the  cases  cited  below  in  the  discussion  of  this  topic,)  they 
must  set  forth  the  time,  place,  and  other  circumstances  attendant  upon 
the  mistake  or  theft,  with  such  certainty,  if  possible,  as  to  show  that  it 
befell  while  the  officer  was  acting  duly  and  properly  in  the  discharge  of 
his  functions  according  to  the  ordinary  rules  and  customs  of  the  business. 
It  is  not  sufficient  for  them  to  show  simply  that  the  explanation  is  a 
reasonable  or  a  probable  one;  they  must  maintain  it  affirmatively  as  a 
positive  fact.  Allison  v.  Farmers'  Bank,  6  Rand.  204;  Minor  v.  Mechan- 
ics' Bank,  1  Pet.  46;  American  Bank  v.  Adams,  12  Pick.  303;  Morris 
Canal  &  Banking  Co.  v.  Van  Vorst,  3  Zabr.  98. 

2.  But  the  proof  which  will  be  required  must  be  in  accordance  with  the 
intrinsic  nature  of  the  fact  itself.  It  would  be  seldom,  for  example,  that 
a  paying  teller  could  show,  with  the  certainty  of  demonstration,  especially 
after  the  lapse  of  much  time,  that  he  had  overpaid  certain  amounts  on 

101 


§  42  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES. 

certain  checks.  The  question  would  seem  to  be  eminently  fit  for  the  de- 
cision of  a  jury,  though  in  the  case  of  the  American  Bank  v.  Adams  the 
court  declared,  as  if  it  were  a  matter  of  law,  that  the  evidence  adduced 
was  insufficient  to  sustain  the  defence  of  an  innocent  overpayment.  The 
evidence  was  that  the  teller  was  considered  to  be  honest,  careful,  and 
vigilant;  that  the  directors  had  stated  their  belief  that  the  loss  occurred 
through  overpayments;  that  they  had  since  continued  to  employ  the 
teller  in  duties  of  trust  and  confidence;  and  that  similar  innocent  losses 
befell  tellers  so  frequently  that  they  might  be  regarded  as  unavoidable  in- 
cidents to  the  business  of  the  office.  The  court  said  that  all  this  doubtless 
went  strongly  to  repel  the  notion  of  want  of  integrity,  but  nevertheless 
was  not  sufficient  to  "  prove  the  specific  mode  of  the  loss  ";  the  defendant 
must  maintain  his  justification  affirmatively.  It  is  not  to  be  supposed, 
however,  that  the  intention  of  the  court  in  delivering  this  opinion  was  to 
signify  that  the  question  of  fact,  to  wit.  what  was  the  real  cause  of  the 
loss,  was  to  be  taken  from  the  forum  of  the  jury.  Their  language  should 
rather  be  construed  as  a  criticism  made  upon  the  evidence  offered  in  a 
certain  cause,  and  serviceable  in  suggesting  the  instructions  which  may 
in  an  appropriate  case  be  given  to  a  jury  to  guide  them  in  weighing  the 
testimony  which  is  before  them.  It  is  clear  that,  though  the  court  may 
declare  as  matter  of  law  that  the  jury  shall  not  regard  proof  of  a  proba- 
bility established  by  testimony  of  a  purely  general  character  as  equiva- 
lent to  definite  proof  of  a  specific  fact,  yet  still  it  must  remain  for  the 
jury,  in  subjection  of  course  to  this  rule  of  law,  to  determine  whether  or 
not  that  specific  fact  is  proved  to  their  reasonable  satisfaction. 

3.  If  the  plaintiffs  assert  that  the  officer  has  received  a  certain  amount 
which  he  has  never  accounted  for,  it  will  be  proper  for  the  defendants  to 
deny  that  he  has  ever  received  the  amount.  This  leaves  the  burden  of 
proving  the  receipt  upon  the  bank.  But  if  the  defendants  only  answer 
that  the  officer  has  accounted  for  all  that  he  has  ever  received,  they  have 
the  onerous  task  of  proving  the  correctness  of  both  sides  of  the  account, 
and  of  making  them  balance.  They  in  fact  relieve  their  adversaries  of 
nearly  all  that  work  which  would  otherwise  have  to  be  done  in  establish- 
ing ?i  prima  facie  case.  Furthermore,  if  they  deny  the  receipt,  they  may 
still  plead  excuses,  if  the  receipt  should  be  proved,  which  they  could  not 
do  if  they  had  adopted  the  other  form  of  answer.  Exeter  Bank  v.  Rogers, 
G  N.  H.  142. 

Entries  made  by  the  clerk  in  the  books  kept  by  liim  in  the  course  of 
his  duties  will,  after  his  death,  be  evidence,  against  the  sureties  in  his 
bond,  of  his  receipt  of  the  moneys  therein  entered  as  received.  Whitnash 
V.  George,  8  B.  &  C.  556. 

(It)  Measure   of  Damages.  —  The   obligation    may  be   in   any  sum 

which  the  directors  see  fit.     Though  it  is  not  probable  that  they  would 

be  allowed  to  recover  any  designated  sum  as  "liquidated  damages"  in 

all  cases,  neither  any  money  in  the  nature  of  vindictive  or  penal  dam- 

102 


PROCEDURE  IN  BOND  CASES.  §  42 

ages,  at  least  from  the  sureties.  From  them  the  recovery  should  be 
limited  to  the  actual  amount  of  the  loss.  The  bond  is  strictly  for  reira- 
•bursement,  not  for  either  punishment  or  profit.  This  character  impera- 
tively fixes  the  measure  of  damages  at  the  amount  of  actual  pecuniary 
loss  or  injury  which  the  bank  has  sustained.  The  rule  was  thus  laid 
down  in  Bank  of  Washington  v.  Harrington,  14  Serg.  &  R.  40.5,  where  it 
was  also  said  that  only  the  injury  naturally  and  in  the  ordinary  course  of 
business  arising  from  the  misconduct  could  be  recompensed.  Remote  re- 
sults cannot  be  proved  against  the  sureties;  much  less,  results  which  are 
in  a  measure  due  to  negligence  or  ignorance  of  the  directors  in  the  events 
transpiring  after  the  malfeasance. 

If  an  officer  converts  bills,  notes,  or  other  species  of  the  promises  to 
pay  of  the  bank,  on  which  it  legally  owes  money,  recovery  upon  the  bond 
may  be  had  for  the  full  nominal  value.  The  defendants  cannot  avail 
themselves  of  any  depreciation  in  the  marketable  value  of  the  converted 
paper  or  securities.  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  Monr.  171. 
This  is  the  only  exception,  if  indeed  even  this  must  necessarily  be  re- 
garded as  such,  to  the  general  rule,  that  the  bank  can  recover  only  the 
amount  of  its  real  and  actual  loss.  Bank  of  Washington  v.  Barrington, 
2  Penn.  27. 

(c)  Pleading  and  Practice.  —  1.  The  precaution  which  should  be  ob- 
served by  defendants  in  a  suit  wherein  the  plaintiffs  seek  to  recover  the 
amount  of  an  alleged  deficit  has  already  been  noticed  (p.  102).  A  few 
more  points  deserve  mention. 

In  suits  for  breach  on  the  part  of  the  officer  of  the  condition  of  his 
bond,  it  is  sufficient  to  aver  non-performance  in  the  words  of  the  bond. 
The  specific  acts  relied  on  as  constituting  the  breach  and  sustaining  the 
allegation  of  it  may  be  made  when  required  at  a  later  stage  in  the  pro- 
ceedings. Pendleton  v.  Bank  of  Kentucky,  supra;  Chetwood,  at  the  suit 
of  the  President,  &c.  of  the  State  Bank,  2  Halst.  32. 

The  defendants  cannot  deny  the  contents  of  the  bond,  set  out  in  or 
made  a  part  of  the  plaintiff's  declaration,  after  they  have  admitted  by 
their  plea  its  execution,  delivery,  and  approval.  So  if  the  bond  recites 
that  the  principal  is  cashier,  &c.,  or  describes  or  designates  him  as  cash- 
ier, &c.,  a  surety,  who  has  admitted  the  whole  bond  in  his  pleadings,  can- 
not thereafter  deny  the  fact  that  the  principal  really  filled  the  office  which 
was  thus  stated  or  designated  in  it.  Milburn  v.  State  of  Maryland,  1  Md. 
1;  State  Bank  v.  Chetwood,  3  Halst.  1. 

It  has  been  declared  in  general  terms  in  California,  though  not  in  a 
banking  case,  that  official  bonds  are  joint  and  several.  People  v,  Jenkins, 
17  Cal.  500.  In  fact,  the  bond  may  be  made  either  joint  or  several,  or 
both,  by  its  own  phraseology.  The  California  decision  can  only  be  re- 
garded as  intimating  that  the  tendency  of  the  courts,  in  all  cases  where 
the  language  is  doubtful  or  reasonably  admits  of  the  construction,  is  to 
regard  such  undertakings  as  joint  and  several.     AVhere  this  is  the  sound 

103 


§  42  OFFICIAL   BONDS   AND    LIABILITIES   OF   SURETIES. 

construction,  the  bank  may  either  sue  any  one  of  the  parties  singly,  or  it 
may  sue  them  all  together.  But  it  cannot  sue  any  intermediate  number. 
Its  option  is  strictly  contined  to  a  suit  against  one  only,  or  against  the 
whole.  Of  course,  if  it  neglects  this  rule,  and  does  sue  more  than  one 
party  and  less  than  all,  the  defendants  can  only  take  advantage  of  the 
error  by  a  plea  in  abatement,  and  will  waive  it  by  a  plea  to  the  merits. 
Minor  v.  Mechanics'  Bank,  1  I'et.  -IG.  Where  a  bond  is  given  by  a  princi- 
pal in  a  certain  sum,  and  by  two  sureties  in  a  much  less  sum  each,  the 
obligation  oi  the  sureties  is  several;  either  one  of  them  may  be  sued 
singly,  and  recovery  may  be  had  from  him  to  the  full  amount  of  said  less 
sum,  provided  this  is  not  greater  than  the  amount  of  tlie  loss  or  injury 
sustained.     Stetson  v.  City  Bank,  12  Ohio  St.  577. 

Answer  by  defendants  that  the  officer  had  made  and  executed  his 
promissory  note  in  full  satisfaction,  and  that  it  had  been  accepted  and 
received  in  full  satisfaction,  was  held  to  be  sufficiently  met  by  a  denial 
only  of  the  making  and  executing.  Morris  Canal  &  Banking  Co.  v.  Van 
Vorst,  3  Zabr.  98. 

2.  Where  the  obligation  of  the  officer  and  his  sureties  is  joint,  and 
they  are  jointly  sued  thereon,  the  admissions  and  declarations  of  the 
officer  are  admissible  in  evidence  against  all  the  defendants  alike.  Am- 
herst Bank  v.  Root,  2  Met.  522;  Pendleton  v.  Bank  of  Kentucky,  1  T.  B. 
Monr.  171.  But  the  language  in  the  Massachusetts  case  cited  points 
directly  to  the  important  qualification  that  this  joint  character  of  the 
obligation  and  of  the  suit  must  be  taken  to  be  essential  to  the  operation 
of  the  rule;  and  that  if  the  undertaking  of  the  surety  were  a  separate 
and  independent  one,  and  probably  even  where  it  was  joint  and  several 
and  he  alone  was  sued  upon  it,  precisely  the  opposite  doctrine  would 
obtain.  This  view  of  the  law  is  hardly  sustained  by  the  Kentucky  case 
cited;  and  Grant  says  that  the  English  principle  is,  that  "  whatever  is 
evidence  available  against  the  principal  is  available  against  the  surety." 
But  though  he  makes  this  statement  so  broadly,  he  cites  no  authority 
which  sustains  it  quite  to  its  full  extent.  The  case  which  he  gives  de- 
clares simply  that,  in  a  suit  against  the  surety  after  the  death  of  the 
principal,  entries  by  the  latter,  in  his  official  books,  of  receipts  of  money, 
were  evidence  in  behalf  of  the  bank  that  these  sums  had  been  received, 
upon  the  ground  that  the  bond  itself  also  guaranteed  the  faithful  keeping 
by  the  same  officer  of  these  very  books.  Grant  on  Bankers  and  Banking, 
p.  257,  citing  Whitnash  i'.  George,  8  B.  &  C.  556. 

In  suit  against  the  principal  and  sureties  on  a  cashier's  bond,  their 
liability  being  by  the  terms  of  the  bond  several  and  not  joint,  it  was  held 
that,  under  the  Practice  Act  of  Massachusetts,  all  three  might  be  joined 
as  parties  defendant  in  one  and  the  same  action.  Grocers'  Bank  v. 
Kingman,  16  Gray,  473. 

3.  It  cannot  be  set  up  in  defence  to  a  suit  upon  a  bond  that  the  bank 
commenced  operations  in  a  manner  contrary  to  its  charter  ;  neither  that 

104 


PROCEDURE  IN  BOND  CASES.  §  42 

it  has  failed  to  perform  its  public  duties  in  redeeming  its  circulating 
notes.  Such  matters  cannot  be  introduced  thus  indirectly,  neither  are 
they  available  for  the  purpose  of  absolving  a  debtor  from  his  liabiUty. 
Hughes  V.  Bank  of  Somerset,  5  Litt.  45. 

Two  or  three  English  cases  should  be  noticed  in  this  connection  before 
dismissing  the  subject. 

A  clerk  who  had  fraudulently  misappropriated  considerable  sums,  died 
before  discovery,  leaving  considerable  personalty  and  no  will.  His  widow 
deposited  the  personalty  with  the  banking-house  and  took  out  letters  of 
administration.  She  then  sought  to  recover  the  personalty,  wiiich  the 
bankers  sought  to  retain.  She  sued  them,  and  they  filed  a  bill  against 
her,  asking  for  an  injunction  and  for  leave  to  administer  on  the  estate. 
It  was  held  to  be  no  answer  to  the  bill  to  reply  that  it  alleged  a  felony, 
and  that  no  civil  remedy  lay  in  respect  thereof.  Wickham  v.  Gatrill,  2 
Sm.  &  G.  853. 

The  father  of  a  banker's  clerk  transferred  stock  into  the  name  of  the 
banker,  in  order  to  cover  defalcations  of  his  son.  Held,  that  this  was  a 
composition  of  a  felony  to  prevent  a  prosecution.  Semble,  that  the  father 
could  not  recover  the  value  of  the  stock,  nor  obtain  an  order  for  its  trans- 
fer back  to  himself.     Claridge  v.  Hoare,  14  Ves.  Jun.  59. 

A  clerk,  who  had  embezzled,  prior  to  conviction  deposited  with  the 
banking-house  certain  title  deeds  which  he  possessed,  and  transferred  to 
them  some  policies  of  insurance  upon  his  life,  as  security,  so  far  as  they 
would  go,  for  the  money  taken.  The  bankers,  however,  thereafter  pushed 
the  prosecution  to  conviction,  whereupon  the  clerk  sought  to  recover  back 
what  he  had  transferred.  The  court  said  that  the  amount  which  the  clerk 
had  embezzled  was  a  debt  owing  from  him  to  his  employers;  that  it  con- 
stituted a  good  and  sufficient  consideration  for  his  transfer  to  them  of  the 
aforesaid  securities  ;  and  that  they  were  entitled  to  hold  and  realize  upon 
these.  Chowue  v.  Baylis,  31  Beav.  351 ;  Grocers'  Bank  v.  Kingman,  16 
Gray,  473. 

Pendency  of  a  suit  by  a  bank  against  its  cashier,  for  broach  of  his 
bond  in  permitting  an  overdraft,  does  not  affect  the  bank's  right  to  set 
up  the  overdraft  as  a  counter  claim  to  a  demand  by  the  casiiier's  as- 
signee. St.  Louis  School  Board  v.  Broadway  Savings  Bank  Estate,  84 
Mo.  56  (1884). 

((/)  Surety's  Right  to  Demand  and  Notice.  —  Xo  demand  need  be 
made  upon  a  surety  prior  to  bringing  suit  against  him.  Pierce  v.  Wil- 
liams, 23  L.  J.  Exch.  322;  Grocers'  Bank  v.  Kingman,  16  Gray,  473. 
Neither  is  he  entitled  to  prompt  notice  of  a  loss  covered  by  his  obligation. 
The  bankers  may  continue  to  employ  the  principal  and  cloak  the  fact  of 
the  loss  so  long  as  they  like,  saying  nothing  about  it  to  the  surety,  and 
concealing  it  even  from  their  own  employees  by  a  false  entry  on  their 
books  of  a  loan  to  the  clerk  of  the  amount.  Grant,  p.  259,  citing  Peel  v. 
Tatlock,  1  Bos.  &  P.  419.     This  law  was  practically  established  by  the 

105 


§  42  OFFICIAL   BONDS   AND   LIABILITIES   OF   SURETIES. 

jury,  who  seem  to  have  thought  that  there  was  nothing  iu  the  obligor's 
contract  with  the  bank  which  put  it  under  any  obligation  to  look  after 
his  interests  iu  the  way  of  notifying  him  of  the  occurrence  of  a  loss. 
Nor  is  the  rule  devoid  of  reason,  for  the  surety  incurs  no  risk  on  the 
ground  of  being  deprived  of  the  opportunity  at  once  to  withdraw  and 
annul  his  suretyship,  and  so  to  save  himself  from  further  loss;  for  we 
have  already  seen  that  no  new  liability  can  accrue  against  hira  if  the 
bank  continues  to  employ  the  officer  after  knowledge  of  his  misconduct. 
And  even  if  this  last  rule  should  ever  be  construed,  as  is  within  the 
bounds  of  possibility,  to  apply  only  to  cases  where  the  ollicer's  miscon- 
duct has  been  fraudulent,  or  otherwise  wrongful  in  its  character,  and  not 
to  apply  where  his  default  has  been  simply  the  result  of  incompetence, 
ignorance,  or  carelessness,  still  it  is  not  improbable  that,  if  the  sureties 
wish  to  secure  the  right  to  be  notified  even  of  such  acts,  they  must  insert 
express  stipulations  to  that  effect  in  their  undertaking  with  the  bank. 
If  they  neglect  to  take  such  precautions  in  their  own  interest,  the  law 
may  well  refuse  to  interfere  to  protect  them  from  the  results  of  tlieir  own 
laches,  except  in  cases  which  are  tainted  with  actual  wrong-doing. 
lOG 


§43 


CHAPTER  IV. 

BY-LAWS   AND   THEIR   EFFECT. 

§  42  A.   Analysis. 

§43.   By-Laws.  * 

Power  to  make  is  inherent,  at  common  law,  in  the  stockholders, 

though  often  given  to  directors  in  the  organic  law. 
Extent  of  the  power. 
A  valid  by-law  must  be 

Passed  by  the  proper  authority. 

Not  contrary  to  tlie  charter  or  statute  law,  nor  public  policy, 
nor  beyond  the  charter  powers,  nor  against  common  right, 
nor  unreasonable. 
Examples  of  good  by-laws,  n.  10. 
Effect  of  By-Laws. 
(a)  As  to  members, 
as  by-laws, 
as  contracts. 
(/>)  As  to  third  parties, 
directly, 
indirectly, 
(a)  Enforcement  of  By-Laws. 
Invalid  By-Laws,  n.  7,  8,  9. 
Establishing  a  lien  on  stock.     §  698. 
Of  savings  banks.     §  620. 
amendment  of.     §  020. 
as  to  production  of  pass-book.     §  620  b. 
part  of  contract  with  depositor.     §  620  a. 
payment  contrary  to.     §620e. 

§  43.  By-Laws  and  their  Effect.  —  The  power  to  make  by- 
laws for  the  government  of  the  corporate  affairs  is  at  com- 
mon law  inherent  ^  in  the  body  of  stockholders,^  but  is  often 
expressed  in  the  charter  or  statute^  and  reposed  in  the  board 
of  directors,'^  and  when  the  organic  law  gives  the  power  for 

1  §  43.    Norris  v.  Staps,  Hob.  2n. 

2  Union  Bank  v.  Ridgely,  1  Harr.  &  Gill,  324. 

3  See  IL  §  8. 

lOT 


§  43  BY-LAWS   AND    THEIR   EFFECT. 

purposes  named,  power  to  make  them  for  other  purposes  is 
im})liedly  exchided.'* 

By-laws  to  be  valid  must  be, —  (1)  Passed  by  the  proper 
authority,  as,  if  the  power  lies  with  the  directors,  a  majority 
is  necessary  to  constitute  a  quorum  to  pass  by-laws,'*  unless  a 
special  provision  alters  this  common  law  rule.^  (2)  Not  in- 
consistent with  charter  or  statute  law,"  nor  beyond  the  powers 
given  in  the  organic  law,'^  but  the  bank  may  renounce  by 
by-law  a  privilege  given  by  the  organic  law,  but  not  a  duty 
imposed  by  it.  (8)  Not  in  violation  of  public  policy  or  com- 
mon right,  as  settled  by  the  principles  of  the  common  law, 
unless  such  infringement  is  expressly  authorized  by  the  or- 
ganic law.**  (4)  Not  unreasonable.  The  j)0\ver  is  for  the 
benefit  of  the  whole  corporation,  and  all  by-laws  that  are  un- 
equal, oppressive,  vexatious,  or  plainly  detrimental  to  the 
interests  of  the  bank  are  void,^  but  the  unreasonableness  must 

4  Child  V.  Hudson's  Bay  Co.,  2  P.  Wms.  207. 

^  Cahill  V.  Kalamazoo  Ins.  Co.,  2  Dougl.  (Mich.)  124. 

^  Hoyt  V.  Shelden,  3  Bosw.  267.  A  by-law  specifying  the  number  of 
directors  constituting  a  quorum  held  valid. 

'  Kennebec  II.  Co.  v.  Kendall,  31  Me.  470;  Hoyt  v.  Thompson,  19 
N.  Y.  207.  Such  by-laws  as  the  following  are  void  as  inconsistent  with, 
or  beyond  the  powers  granted  in  the  charter: — (1.)  By-laws  creating  a 
new  office.  Rex  v.  Ginever,  6  T.  R.  735.  (2.)  Giving  a  vote  to  one  not 
entitled,  or  restricting  the  right  of  voting.  Rex  r.  Bird,  13  East,  384; 
McCoUough  V.  Annapolis  R.  Co.,  4  Gill,  58.  (3.)  Altering  the  mode  of 
election  or  qualifications  for  eligibility  to  office,  as  requiring  a  certain 
number  of  shares  for  admission,  or  office,  or  giving  a  vote  for  every  share. 
Taylor  u.  Griswold,  2  Green,  N.  J.  223;  Powell  v.  Regem,  3  Bro.  P.  C. 
436.  (4.)  Imposing  a  liability  for  debts  of  the  corporation.  13  Met. 
539.  (5.)  A  by-law  embracing  not  only  members,  but  strangers  beyond 
the  legislation  of  the  bank,  would  be  void.  Dodwell  v.  Oxford,  2 
Vent.  34. 

8  Taylor  v.  Griswold,  2  Green,  N.  J.  223. 

8  As  a  by-law  that  mistakes  in  payment  will  not  be  rectified  after  the 
person  leaves  the  bank.  Farmers'  Bank  v.  Smith,  19  Johns.  115.  By- 
laws taking  away  the  right  of  members  to  legal  redress.  Player  r.  Archer, 
2  Sid.  121:  Retrospective  by-laws  are  void,  botli  at  common  law  and 
under  the  United  States  Constitution,  being  ex  post  fhcto,  as  the  bank 
has  only  such  powers  as  the  legislature  gave,  and  the  State  could  not 
give  a  power  it  did  not  itself  possess.  Howard  i'.  Savannah,  T.  Charlt. 
173.  A  by-law  levying  taxes,  Or  depriving  of  property,  is  void.  Un- 
108 


BY  LAWS    AS   CONTRACTS.  §  43 

be  demonstrated  ^'^  and  the  question  is  for  the  court.^^  This 
covers  much  of  the  same  ground  as  (3),  and  is  subject  to  the 
same  exception. 

a.  Effect  of  By-Laws  on  Members. — 1.  A  valid  by-law  binds  ^^ 
each  member  as  though  a  j^art  of  tlie  charter,  even  thougli  he 
was  not  a  member  wiicn  tlie  by-law  was  passed,!^  Enforcement 
and  the  bank  may  enforce  the  penalty  by  suit  in  "^  ^y-iaw. 
an  action  of  debt  or  assumpsit  ;i^  and  there  may  be  other 
methods  of  enforcement  beside  pecuniary  penalties,  as  by  sus- 
pension of  the  power  of  voting,i^  but  not  by  imprisonment  nor 
forfeiture  of  goods,  as  of  the  shares  of  the  member,  unless 
such  power  is  specially  given  in  the  organic  law.^*^ 

For  examples  of  binding  by-laws,  see  note  12. 

2.  An  invalid  by-law  has  no  effect  whatever  as  a  hy-law 
upon  anybody.  But  as  a  contract  it  may  be  good  as  against 
members  or  others  who  assent  to  it,i"  but  the  assent  must  be 
actual.     The  assent  of  absent  members  is  only  presumed  in 

less  so  provided  in  the  articles  of  association  or  other  organic  law,  a 
company  cannot  interfere  with  the  rights  of  property  and  dealings  with 
third  persons,  as  by  creating  a  lien  on  stock,  or  refusing  to  transfer  until 
the  stockholders'  debt  to  the  company  is  paid,  and  a  bona  fide  purchaser 
without  notice  of  such  by-law  can  compel  the  company  to  transfer 
the  stock  to  him  on  its  books.  Driscoll  v.  West  Bradly  Mauuf .  Co. ,  59 
N.  Y.  96. 

"  Paxson  1-.  Sweet,  1  Green,  N.  J.  196. 

^1  Commonwealth  v.  Worcester,  3  Pick.  462. 

12  The  bank  may  enforce  its  riglit  to  the  service  of  members  by  a  by- 
law imposing  a  penalty  on  those  who  refuse  to  serve  in  office,  or  to  take 
the  oath  of  office,  or  members  who  refuse  to  attend  meetings.  Rex  v. 
Weymouth,  7  Mod.  374;  Tobacco  Pipe  Makers  v.  Woodroffe,  7  B.  &  C. 
838.  So  the  refusal  to  continue  in  office.  Planters'  Bank  v.  Lamkin, 
R.  M.  Charlt.  34. 

13  Susquehanna  Ins.  Co.  v.  Perrine,  7  Watts  &  S.  348.  A  member 
assents  by  the  fact  of  membersliip  to  all  valid  by-laws,  whether  he  knows 
of  them  or  not. 

"  Tidd's  Prac.  3,  4. 

15  Commonwealth  v.  Cain,  ,5  S.  &  R.  510. 

16  Barter  v.  Commonwealth,  3  Penn.  &  W.  253;  Hart  v.  Albany,  9 
Wend.  571;  Cotter  r;.  Doty,  5  Ohio,  395;  Mobile  v.  Tuille,  3  Ala.  144; 
State  r.  :Morris  R.  Co.,  3  N.  J.  360. 

"  Cooper  V.  Frederick,  9  Ala.  738;  Slee  v.  Bloom,  19  Johns.  456;  Stet- 
son V.  Kempton,  13  Mass.  282. 

109 


§  43  BY-LAWS    AND   THEIR   EFFECT. 

reference  to  legal  votes  of  a  corporate  mecting.^^  Of  course 
this  contract  rule  can  ai)ply  only  to  by-laws  void  merely  be- 
cause they  infringe  on  rights  "which,  though  secured  by  com- 
mon law,  are  still  such  that  the  owner  can  waive  or  part  with 
them  by  agreement ;  no  by-law  void  because  contrary  to  char- 
ter, statute,  public  policy,  or  morality,  can  take  effect  as  a 
contract  or  othcrwisi'.^'-^ 

h.  Efifect  of  By-Laws  on  TMrd  Persons.  —  The  effect  of  in- 
valid by-laws  has  just  been  noted. 

Valid  by-laws  have  no  effect,  as  by-laws,  on  strangers,  that 
is,  persons  not  members  of  the  corporation,  unless  by  statute 
they  have  been  made  obligatory  on  such  persons.-^ 

But  such  by-laws  may  indirectly  affect  third  persons.  Just 
as  any  contract  or  arrangement  between  A.  and  B.  may  affect 
the  dealings  of  C.  with  either,  by  limiting  the  power  of  A.  or 
B.,  or  by  reason  of  C.'s  knowledge  of  the  arrangement  and 
contracts  in  reference  to  it.  In  the  same  way  as  a  usage  pe- 
culiar to  a  single  bank  may ,2^  —  (1)  by  bearing  on  the  actual 
authority  ^-  of  an  officer  in  dealings  with  such  persons ;  (2)  by 
determining  the  right  of  a  member  to  deal  in  a  certain  way 
with  such  third  persons,  and  bind  the  rights  of  the  bank 
thereby,  as  in  case  of  by-laws  concerning  the  transfer  of  stock ; 
(3)  by  entering  into  transactions  so  as  to  affect  parties  who 

^8  Insurance  Co.  v.  Connor,  17  Pa.  St.  13G;  Stetson  v.  Kempton,  13 
Mass.  282. 

19  Adley  v.  Whitstable  Co.,  17  Ves.  323. 

20  As  in  Soper  v.  Harvard  College,  1  Pick.  177,  where  a  State  statute 
had  forbidden  innkeepers  to  give  credit  to  the  students  in  violation  of  any 
rules  of  the  College. 

21  See  §  0  e. 

22  A  person  dealing  with  a  corporation  officer,  whose  duties  are  regu- 
lated by  the  by-laws,  is  chargeable  with  notice  of  the  limitations  of  his 
authority  contained  in  charter  and  by-laws,  (Dabney  v.  Stevens,  40  How. 
N.  Y.  341,)  unless  the  bank  has  held  out  the  officer  to  such  person  as  hav- 
ing more  authority  than  is  actually  the  case,  and  even  this,  though  of  su- 
perior force  to  by-laws  and  private  instructions,  cannot  give  third  persons 
a  right  to  infer  authority  beyond  charter  limits.  INIarsh  v.  Fulton  County, 
10  Wall.  G7G;  Clark  v.  Des  Moines,  19  Iowa,  WO.  Every  one  must  take 
notice  of  the  restrictions  in  the  articles  of  association  aud  the  rest  of  the 
organic  law. 

110 


BY-LAWS   AS   AFFECTING   THIRD    PERSONS.  §  43 

employ  the  bank  to  act  for  them  whether  they  know  of  the 
by-laws  or  not;^^  (4)  by  affecting  transactions  into  which 
such  persons  enter,  being  reasonably  aware  that  the  bank 
will  be  a  factor  in  the  transaction,  and  having  actual  knowl- 
edge of  the  by-law  ;^^  (5)  and  by  the  consent  in  any  other 
way  of  the  said  third  person  to  be  bound  by  the  said  by- 
laws. 

A  by-law  may  be  the  root  from  which  will  come  a  usage, 
that  shall  grow  into  common  law,  and  roof  all  with  its 
shade. 

Ill 


CHAPTER   V. 

BUSINESS    OF   THE   BANK.  —  TIME    AND   PLACE. 

§  43  A.   Analysis. 
§  44.    The  Six  Qukstions. 
§  45.    Time.     When  can  a  bank  do  business. 
BoRinning.     II.  §§  12,  17. 
Doing  business  before  it  is  authorized. 

"Exercise  of  Privilege"  requires  a  de  jure  corporation. 
Ordinary  business,  a  de  facto  corporation. 
Only  tlie  State  can  object.     §  726  rf,  e;  §  758,  cases. 
End  of  business.     §§  76.3,  706 ;  II.  §  46. 
(a)  Banking  hours.     §§  646,  047. 
Judicial  cognizance  of. 

Reasonableness  of,  —  what  is  reasonable  as  to  banking  business 
may  not  be  reasonable  as  a  limitation  upon  the  business  of 
others,  as  delivery  by  an  express  company. 
§  4G.    Place.     §§  69  a,  168;  II.  §§  41,  108//,  141  L. 

Legal  home  in  State  where  created  or  located. 
Cannot  take  its  franchises  into  another  sovereignty,  but  may  do 
ordinary  business  in  another   State  through  agents,  if  it  lias 
{h)       power  to  do  the  business  under  its  charter,  and  there  is  nothing 
to  prevent  in  the  law  of  its  own  State  or  that  in  which  it  under- 
takes to  do  the  business. 
(a)  May  buy  a  bill  of  exchange  in  another  State, 
(c)   May  hold  land. 
{(/)  Cannot  issue  bank  notes  in  another  State. 

(e)  Nor  have  an  agency  for  deposit. 

(f)  Place  of  a  national  bank  is  the  localit}'  named  in  its  organization 

certificate. 

§  44.  Six  Questions  naturally  arise.  —  When  can  tllC  bank 
do  business  ?  "Where  must  it  be  done  ?  What  business  can 
it  do  ?  How  is  the  business  to  be  done  ?  What  riglits,  du- 
ties, and  liabilities  arise  in  doing  it  ?  and,  What  is  the  effect 
of  the  acts  of  a  bank  beyond  its  authority  ? 

§  45.    Time.  —  A  bank  can  beg.in  business  as  soon  as  it  has 

obtained  its  charter  and  fulfilled  the  antecedent  conditions  of 

Beginning       '^^^  orgauic  law,  if  any.     Under  the  State  statutes 

of  business,     generally,  the  organization  certificate  must  be  duly 

112 


WHEN   THE   POWER   TO    DO    BUSINESS   ACCRUES.  §  45 

filed,  and  a  specified  portion  of  the  capital  paid  in.^  Under 
the  National  Banking  Act  the  execution  of  the  organization 
certificate  makes  the  bank  a  body  corporate,  but  no  business 
except  that  incidental  to  its  own  internal  organization  can  be 
done  until  authorized  by  the  comptroller  to  commence  the 
business  of  banking.^ 

If  a  bank  in  fact  enters  upon  the  exercise  of  business 
powers  before  it  has  a  right  to,  (as  if  by  some  irregularity 
or  informality  it  is  not  legally  constituted  a  bank  B^nk  doing 
with  the  legal  powers  of  one,)  no  objection  on  this  ^efilre  u  i 
ground  can  be  raised  by  any  private  person  to  authorized. 
avoid  a  just  liability  arising  from  such  transaction  ^  (see 
Ultra  Vires')  ;  but  if  the  act  of  the  bank  is  the  exercise  of  a 
privilege,  (or  power  to  do  an  act  of  a  nature  beyond  the  right 
of  an  individual,  and  in  contravention  of  the  common  rights 
of  others,  which  only  the  sovereign  can  do  or  authorize,)  it 
is  not  enough  for  it  to  be  a  de  facto  corporation,  it  must  be  a 
corporation  de  jure','^  for  no  one  shall  infringe  upon  the 
liberties  or  property  of  others  except  when  duly  authorized. 
See  §  726. 

This  reason  does  not  apply  to  the  cases  above,  in  which  a 
de  facto  bank  lends  money,  receives  deposits,  or  does  other 
acts  in  the  nature  of  contract,  and  which  do  not  involve  the 
exercise  of  privilege.  Justice  between  the  parties  in  such 
matters  is  not  affected  by  any  question  of  the  bank's  proper 
organization.     §  726. 

The  hank  can  never  take  advantage  of  its  own  wrong  to 
avoid  liability  for  tort,  or  on  a  contract  implied  upon  the  facts, 
or  any  just  liability  in  the  case.  For  instance,  stockholders 
cannot  escape  their  usual  liability  to  redeem  circulation 
because  of  irregular  organization  of  the  bank.^ 

^  §  45.  P.  S.  673.  One  half  must  be  paid  in  specie,  and  examined 
by  the  commissioners.     Same  with  national  bank.     II.  §  14. 

2  II.  §  8. 

8  Allison  V.  Hubbell,  17  Ind.  559;  Southern  Bank  t-.  Williams,  25 
Ga.  534. 

*  N.  Y.  Cable  Co.  v.  Mayor,  etc.  of  N.  Y.,  104  N.  Y.  43. 

5  McDougal  V.  Bellamy,  18  Ga.  411. 

VOL.  I.  8  113 


§  45  BUSINESS   OF   THE    BANK.  —  TIME   AND    PLACE. 

The  termination  of  a  bank's  power  to  do  business  will  be 
considered  under  the  heads  of  Dissolution  (§  7G6)  and  For- 
feiture (§  722).  It  may  be  noted  here,  that  the  mere  happen- 
ing of  such  a  breach  of  law  as  may  cause  forfeiture  may  not 
of  itself  affect  the  business  powers  of  the  bank.  Its  subse- 
quent acts  are  valid,  for  the  State  may  waive  the  forfeiture, 
and  the  right  of  the  bank  to  continue  its  business  remains 
until  forfeiture  is  judicially  declared. 

All  these  rules  may  be  altered  by  express  legislation. 

(rt.)  Banking  Hours.  —  Between  the  boundaries  above,  the 
bank  may  adopt  reasonable  (and  what  is  reasonable  varies 
according  as  the  rule  affects  only  banking  business  or  the 
business  of  others  as  well)  rules  and  usages  concerning  the 
hours  of  each  day  within  which  it  will  do  business.  Such  a 
usage  will  be  judicially  recognized.  The  remainder  of  this 
section  is  devoted  to  these  two  points,  the  judicial  recognition 
and  the  reasonableness  of  banking  hours. 

Whether  or  not  the  courts  will  take  judicial  cognizance  of 
what  are  banking  hours  in  any  particular  place  is,  of  course, 
Judicial  ^  question  which  must  be  decided  specially  concern- 
cognizance.  jj^g  ^|-j^|.  particular  place.  Undoubtedly,  no  court 
would  take  judicial  cognizance  of  the  banking  hours  of  any 
place  not  lying  within  the  area  of  the  jurisdiction  of  the  court. 
The  English  courts  take  judicial  notice  of  what  are  banking 
hours  in  the  "  city,"  so  called,  of  London;*^  but  in  other  parts 
of  London,  and  in  other  cities  and  towns,  the  hours  must  be 
proved.'^  The  fact  of  what  was  the  hour  for  closing  a  certain 
bank  in  the  city  of  New  York  was  also  found,  as  an  essential 
fact,  by  the  court,  in  reporting  a  case  for  decision  of  questions 
of  law.^ 

"  Banking  hours  "  are  so  far  recognized  by  the  courts  that 
any  transaction  in  the  ordinary  course  of  banking  business, 
which  is  to  be  had  with  the  bank  upon  any  day,  must  be  had 
•within  "  banking  hours  "  upon  that  day.  Thus,  a  notice  left 
with  a  bank  after  expiration  of  such  hours  on  any  day  is 

*  Parker  v.  Gordon,  7  East,  385;  Jameson  v.  Swinton,  2  Taunt.  225. 

■f  Hare  i-.  Ilenty,  10  C.  B.  n.  s.  G5. 

^  Salt  Springs  National  Bank  v.  Burton,  58  N.  Y.  430. 

114 


BANK   HOURS   AND   EXPRESS   DELIVERY.  §  45 

operative  as  notice  only  at  and  from  such  later  time  as,  in  the 
ordinary  course  of  business,  it  is  opened  and  read.^ 

If  a  bank  should  say  it  would  pay  deposits  only  during  a 
certain  five  minutes  each  day,  that  might  be  considered  un- 
reasonable, and  when  the  limitation  affects  the  time  Reasonabie- 
within  which  others  may  perform  their  peculiar  "^^^• 
business,  as,  for  example,  when  an  express  company  may  de- 
liver packages  to  the  bank,  a  different  standard  of  reasonable- 
ness applies  from  what  is  proper  when  the  rule  only  affects 
the  hours  within  which  the  public  may  avail  themselves  of 
the  facilities  of  the  bank. 

A  rule  that  the  bank  would  not  receive  deposits  after  three 
o'clock  would  be  reasonable,  and  though  the  officers  should 
remain  in  the  bank  an  hour  or  two  they  would  not  be  bound  to 
receive  deposits  after  that  time ;  but  when  the  rule  regulates, 
not  banking  business,  but  the  business  of  a  carrier,  for  exam- 
ple, the  convenience  of  the  latter  must  be  considered  as  well 
as  that  of  the  bank. 

In  a  Wisconsin  case,^"  the  bank  had  after  banking  hours 
received  packages  coming  on  a  certain  train  by  express 
many  times,  the  teller  being  usually  the  receivino; 

£c  mi  .  .,        ,  ^    ,  Marshall  r. 

othcer.  Ihe  express  agent  on  the  day  of  the  trou-  Amer.  Ex- 
ble  offered  a  package  to  the  teller  in  the  bank,  after  ^'^*'  ^°* 
hours,  but  at  such  time  as  they  had  been  often  before  re- 
ceived, the  package  having  come  on  the  train  just  mentioned. 
The  teller  said,  "  Fred,  you  will  have  to  take  the  package  back 
with  you,  for  the  cashier  has  gone  to  tea."  Tlie  court  said, 
that  what  are  reasonable  hours  for  receiving  deposits,  dis- 
counting bills,  <fec.,  are  not  necessarily  reasonable  hours  for 
receiving  express  packages,  and  a  bank  cannot  declare  it  will 
not  receive  from  a  carrier  after  what  it  calls  banking  hours, 
and  thereby  thrust  on  him  a  continuance  of  his  extraordi- 
nary responsibility ;  the  carrier  after  such  offer  is  a  gratuitous 
bailee. 

In  Kentucky  the  court  said,  in  substance  :  "  In  the  ab- 
sence of  proof  of  usage  in  New  Orleans  as  to  delivery  within 

9  Calisher  v.  Forbes,  41  L.  J.  Ch.  56. 
^0  Marshall  v.  American  Express  Co.,  7  Wis.  1. 

115 


§  45  BUSINESS   OF  THE   BANK.  —  TIME    AND    PLACE. 

Young  t'.  banking  hours,  or  of  any  reference  to  banking 
Smith.  hours  in  the  contract  with  the  carrier,  we  do  not 

perceive  that,  as  matter  of  law,  the  right  to  deliver  a 
box  of  specie  is  restricted  to  banking  hours.  If  in  mahiiig 
or  offering  to  make  the  delivery  the  convenience  of  the  person 
who  is  to  receive^  and  the  safety  of  the  commodity  after 
it  is  received,  are  to  be  regarded,  as  they  probably  should  be, 
to  a  reasonable  extent,  it  would  seem  sufficient  if  the  offer 
were  made  at  any  time  of  the  day  when  the  business  houses 
of  the  city  were  open,  and  when  convenient  means  were  at 
hand  for  the  safe  transportation  of  the  article  from  the 
wharf."  11 

In  this  case  the  consignee  of  the  specie  ivas  not  a  bank,  but 
a  private  person,  and  though  he  desired  to  deposit  in  bank. 
Discussion  of  nothing  had  been  said  to  the  carrier  about  dcliv- 
these  cases.  ^^^  \^\i\\  reference  to  this  purpose.  But  suppose  a 
bank  has  a  vault  with  a  time  lock,  would  it  be  reasonable  to 
hold  good  a  delivery  after  that  lock  was  set,  even  though  some 
of  tlic  officers  might  be  found  in  the  bank  ?  And  an  offer 
to  deliver  when  the  bank  is  shut  and  the  officers  gone  is 
clearly  bad.i^  If,  as  the  Kentucky  judge  said  above,  the  con- 
venience of  the  consignee  and  the  safety  of  the  commodity  are 
to  be  regarded,  it  would  seem  clear  that,  when  the  bank  has 
closed  its  vaults  and  the  officer  who  can  open  them  is  gone, 
or  if  they  are  fastened  with  time  locks,  it  would  not  be  rea- 
sonable to  hold  the  bank  bound  to  receive  the  money,  unless, 
as  in  the  "Wisconsin  case,  there  was  a  custom  to  receive  after 
hours.  A  grocer  is  not  obliged  to  stay  at  his  place  of  business 
to  receive  express  matter  after  the  hours  usual  in  mercantile 
business.  Why  should  a  banker  have  to  be  ready  beyond  the 
hours  recognized  as  usual  for  the  bank  to  be  open  and  do 
business  ?  Of  course,  if  he  is  at  the  bank,  and  can  receive  the 
package  witliout  any  further  inconvenience  than  reopening 
liis  safe,  he  should  do  so.  The  fair  thing  would  seem  to  be, 
not  tliat  a  bank  must  receive  after  the  ordinary  banking 
hours  or  lose  all  redress  except  for  gross  negligence  of  the 
carrier ;  nor  that  the  carrier  continues  an  insurer,  but  that, 
11  3  Dana,  91.  ^-^  Mervin  v.  Butler,  17  Conn.  138. 

116 


LOCALITY.  §  46 

after  the  consignee  knows  of  the  arrival  of  the  package,  the 
carrier  is  held  to  ordinary  diligence,  no  more  nor  less,  that 
is,  a  warehouse  liability,  until  the  banking  hours  of  the  next 
day,  when  the  bank  can  with  convenience  and  safety  receive 
the  money. 

§  46.  Place.  A  bank  has  its  legal  home  ^  in  the  State  by 
which  it  is  created,  or,  in  case  of  a  national  bank,  the  State  in 
which  it  is  located.  Its  domicil  ^  is  there  and  it  is  a  citizen  ^  of 
that  State  in  reference  to  suing  in  any  State  or  Federal  court ; 
it  cannot  transfer  its  franchises  ^ "  into  any  other  sovereignty ; 
"  it  exists  by  force  of  the  law  creating  it,  and  where  that 
ceases  to  operate  it  can  have  no  existence."* 

But  such  ordinary  business  as  its  organic  law  gives  it  power 
to  do,  it  mag,  hy  its  agents,  transact  in  any  other  State,  unless 
prohihited  hy  its  charter,  or  hy  the  laws  or  policy  of  such  other 
State.^  Agencies  for  specific  purposes,  as  for  the  redemption 
of  bills  or  the  dealing  in  bills  of  exchange,^  may  be  established 
in  other  places.  In  these  cases,  it  is  for  the  convenience  of 
the  public  that  such  should  be  the  case.'    But  there  is  no  case 

^  §  46.  The  language  of  Waite,  C.  J.,  in  Ex  parte  Schollenberger,  96 
U.  S.  369. 

'•2  Adams  r.  Railroad,  6  H.  &  N.  404;  Maclaren  v.  Stainton,  16 
Beav.  279. 

8  See  Green's  Ultra  Vires  (1880),  p.  4;  Ducat  v.  Chicago,  48  111.  172; 
Fargo  V.  McVicker,  38  How.  N.  Y.  1.  But  in  other  respects  than  the 
right  of  bringing  suits,  a  corporation  has  no  status  in  other  States  as  a 
citizen  of  its  creator. 

*  "  A  corporation  cannot  migrate  beyond  its  own  State.  Runyon  v. 
Lessee  of  Corte,  14  Pet.  122,  131.  The  corporation  itself  cannot  act 
validly  beyond  the  territory  of  its  sovereign,  and  the  first  meeting  in  New 
York  of  a  Maine  corporation  is  void.  But  the  directors  may  act  val- 
idly in  another  State,  as  where  the  directors  of  a  Vermont  corporation 
met  in  Massachusetts  and  granted  mortgages,  the  action  was  valid. 
Arms  V.  Conant,  36  Vt.  745;  see  Galveston  R.  R.  Co.  v.  Cowdrey,  11 
Wall.  459. 

*  Bank  of  Augusta  v.  Earle,  13  Pet.  519. 

5  See  on  the  general  principle,  Pauly.  Virginia,  8  Wall.  168;  Ex  parte 
Schollenberger,  96  U.  S.  369 ;  Newberg  Petroleum  Co.  v.  Weare,  27  Ohio 
St.  343. 

«  See  (a),  p.  118,  and  (e),  p.  120. 

'  City  Bank  of  Columbus  y.  Beach,  1  Blatchf.  C.  C.  425;  Bank  of  Au- 

117 


§  46  BUSINESS   OF   THE   BANK.  —  TIME   AND    PLACE. 

which  liolds  that  an  agency  for  the  exercise  of  the  more  im- 
portant and  valuable  functions,  such  as  issuing  circulating 
paper  or  discounting  notes,  or  an  agency  designed  to  carry 
on  the  general  business  of  banking,  would  be  regarded  as 
legal.  For  such  nominal  establishment  of  agencies  might 
easily  result  in  the  practical  establishment  of  a  network  of 
branch  banks  throughout  the  home  State  or  in  other  States. 

States  differ  in  their  corporation  laws ;  some  restrict  the 
capital ;  some  make  the  stockholders  individually  liable  ;  some 
require  deposits  with  the  State  for  the  security  of  the  public. 
Of  course  no  State's  comity  will  extend  to  allow  the  corpora- 
tions of  other  States  in  which  no  such  laws  exist,  to  come  and 
undermine  such  regulations.  Such  a  State  will  say  to  foreign 
corporations,  "  If  you  wish  to  do  business  here,  you  must  put 
yourselves  under  my  laws." 

Some  business,  as  receiving  deposits,  certifying  ^  checks,  and 
giving  information  of  most  kinds,^  must  be  done  at  the  hanking- 
Officers  house,  or  place  set  apart  for  those  purposes  by  the 

ness^way'"  bank,  and  cannot  be  done  so  as  to  bind  the  company 
h^\ *H  by  an  officer  away  from  the  bank  ;  other  business, 
§  i"8-  as  receiving  information,  and  collecting  debts,  may 

be  done  by  an  officer  away  from  the  bank  ;  the  question  is, 
"  Does  the  proper  performance  of  the  business  require  any 
knowledge  or  appliances  that  can  only  be  fully  possessed  at 
the  office."  ^^ 

(a)  The  Chief  Justice  of  the  United  States  Supreme  Court 
Bank  of  ^^^  ^^^^'  "  ^^^^^^^  persons  through  the  interven- 
Aupusta  V.  tion  of  agents  are  continually  making  contracts  in 
May  buy  a  countrics  in  which  they  do  not  reside,  and  where 
chail^'e'hi  an-  they  are  not  personally  present  when  the  contract 
other  State,     j^  t^^^q  ;  and  nobody  has  ever  doubted  the  validity 

gusta  v.  Earle,  13  Pet.  519;  People  v.  Oakland  County  Bank,  1  Dougl. 
282;  Tombigbee  Pt.  R.  Co.  v.  Kiieeland,  4  How.  U.  S.  16. 

8  A  bank  can  reject  an  acceptance  of  a  cashier  made  away  from  the 
bank,  if  before  his  return  anything  happens  that  would  make  such  ac- 
ceptance improper,  except  as  against  a  hona  fide  purchaser  without  notice. 
BuUard  v.  Randall,  1  Gray,  60.5.     See  however  (/),  p.  120. 

8  Merchants'  Bank  v.  Rudolf,  5  Neb.  527.     See  p.  121. 

1"  See  on  this  subject  "  Cashier,"  §  168. 
118 


BUYING   BILLS   OF   EXCHANGE   IN   ANOTHER   STATE,  §  46 

of  these  agreements.  And  what  greater  objection  can  there 
be  to  the  capacity  of  an  artificial  person,  by  its  agents,  to 
make  a  contract  within  the  scope  of  its  limited  powers,  in  a 
sovereignty  in  which  it  does  not  reside,  provided  such  con- 
tracts are  permitted  to  be  made  by  it  by  the  laws  of  the 
place  ?  The  corporation  must  no  doubt  show  that  the  laws  of 
its  creation  gave  it  authority  to  make  such  contracts,  through 
such  agents." 

In  this  case,  a  Georgia  bank  having  power  to  purchase  bills 
of  exchange  had  by  its  agent  bought  a  bill  in  Alabama.  The 
Circuit  Court  decided  that  a  Georgia  bank  could  not  exercise 
its  powers  of  discounting  in  another  State,  but  the  Supreme 
Court,  in  a  powerful  opinion,  of  which  the  above  is  a  fragment, 
reversed  the  Circuit  decision,  holding  that  the  comity  of  na- 
tions was  administered  by  the  courts  of  the  various  States,  and 
acknowledged  by  them  as  a  proper  ground  of  judgment,  and 
that  when  the  organic  law  of  the  bank  allows  it  to  make  such 
contract  in  another  State,  and  such  transaction  is  not  con- 
trary to  the  law,  policy,  or  interests  of  such  State,  there  is  no 
reason  for  refusing  to  sustain  the  contract.  This  was  done 
in  this  case,  establishing  a  rule  that  has  been  followed  in  New 
York,  Missouri,  Massachusetts,  Louisiana,  and  other  States, 
and  may  be  regarded  as  settled  law. 

(6)  The  corporation  must  show  that  the  law  of  its  creation 
gave  it  authority  to  make  such  contracts  as  those  it  seeks 
to  enforce.  Yet,  as  in  case  of  a  natural  person,  it  is  not 
necessary  that  it  should  actually  exist  in  the  sovereignty 
in  which  the  contract  is  made.  It  is  sufficient  that  its  ex- 
istence, as  an  artificial  person,  in  the  State  of  its  creation,  is 
acknowledged  and  recognized  by  the  State  or  nation  where 
the  dealing  takes  place,  and  that  it  is  permitted  by  the 
laws  of  that  place  to  exercise  the  powers  with  which  it  is 
endowed.i^ 

(c)  In  those  States  where  there  are  no  general  statutes  or 
settled  policy  restricting  them  in  this  respect,  corporations  of 

11  Commercial  Bank  of  Vicksburg  v.  Slocomb,  14  Pet.  60;  Irvine  v 
Lowry,  14  Pet.  293.  And  see  Bank  of  Augusta  v.  Earle,  13  Pet.  584. 
Ohio  Railroad  Co.  v.  Wheeler,  1  Black.  286. 

119 


§  46  BUSINESS   OF   THE   BANK.  —  TIME   AND   PLACE. 

Holding  land  other  Statcs  may  purchase  and  hold  lands  ad  lihi- 
sta'ter  turn,  provided  their  charters  give  them  the  compe- 

tent power.^ 

(f?)  In  Virginia,  it  was  decided  that  no  recovery  could  be 
had  upon  notes  there  issued  by  a  banking  corjjoration  of 
^,  ,    .    *     another  State,  through  an  agency  established  in 

Notes  issued  '  "  ,  . 

in  another  Virginia,  inasmuch  as  such  banking  operations 
were  contrary  to  the  policy  of  the  statute  against 
unincorporated  banking  companies;  though  it  was  admitted 
that  notes,  originally  negotiated  and  indorsed  in  Virginia, 
and  that  contracts  ancillary  to  banking  operations,  might 
legally  be  made  there  by  such  a  corporation.^^ 

(e)  Having  an  agency  to  receive  deposits  in  another  county 
than  that  of  the  bank's  location,  contrary  to  charter,  is  a  cause 
of  forfeiture,  though  an  agency  to  redeem  bills  is 
difpo"it"s  m  not."  So  it  is  unlawful  for  a  national  bank  of  New 
another  state,  j^^^^^^  to  havc  an  agcut  to  rcccive  deposits  in 
Philadelphia.  •^ 

A  bank  within  the  sphere  of  its  action  may  bind  itself  to 
do  any  act  in  any  place?^ 

(/)  The  place  named  in  the  organization  certificate  fixes  the 
locality  of  a  national  bank,!^  ^nd  its  general  business  must 
National  bc  douc  there ;  ^^  but  this  provision  is  to  be  con- 
bank's  locus,  strued  reasonably.  "The  business  of  every  bank 
away  from  its  office  —  frequently  large  and  important — is 
unavoidably  done  at  the  proper  place  by  the  cashier  in  per- 

12  Silver  Lake  Bank  v.  North,  4  Johns.  Ch.  370;  Lumbard  v.  Aldrich, 
8  N.  H.  34;  Lathrop  v.  Commercial  Bank  of  Scioto,  8  Dana,  119;  Bank 
of  Washtenaw  v.  Montgomery,  2  Scam.  428;  2  Kent,  Cora.  284,  285;  New 
York  Dry  Dock  v.  Hicks,  5  McLean,  111;  Farmers'  Loan  Co.  v.  Mc- 
Kinney,  6  id.  1.  The  burden  is,  however,  upon  the  corporation,  or  those 
claiming  under  it,  to  show  that  by  its  charter  it  is  a  body  politic  author- 
ized to  take  or  convey  lands.     Lumbard  v.  Aldrich,  8  N.  H.  34. 

18  Bank  of  Marietta  v.  Pindall,  2  Rand.  4G5. 

"  Teople  V.  Oakland  County  Bank,  1  Doug.  (Mich.)  282. 

15  National  Bank  of  Camden  v.  Pierce,  18  Alb.  Law  J.  IG. 

10  Bank  of  Utica  v.  Smedes,  3  Cowen,  684;  McCall  v.  By  ram  Manufac- 
turing Co.,  6  Conn.  420. 

"  Cooke  V.  State  National  Bank,  52  N.  Y.  96. 

18  Burton  v.  Burley,  12  Leg.  News,  178;  S.  C,  9  Rep.  301. 

120 


CONTRACTS   AWAY    FROM    THE   BANK.  §  46 

son ;  or  by  correspondents  or  other  agents."  So,  where  a 
cashier  bought  gold  and  paid  for  it  by  certifying  checks  at  the 
counter  of  another  bank,  it  was  held  proper.^^ 

A  national  bank  in  another  State  cannot  have  an  office  of 
discount  or  deposit  in  New  York.^o 

But  representations  that  a  note  is  good,  made  by  a  cashier 
in  another  city,  bind  the  bank.^i 

19  Merchants'  National  Bank  v.  State  National  Bank,  10  Wall.  604. 

20  National  Bank  of  New  Haven  v.  The  Phoenix  Bank,  6  Hun,  71. 

21  Houghton  V.  First  National  Bank,  26  Wis.  663;  BisseU  v.  First  Na- 
tional Bank,  69  Pa.  St.  415. 

121 


CHAPTER   VI. 

BUSINESS   POWERS. 

§  46  A.    Analysis. 

§  47.    Business  Powers,  Express  or  Implied,  Original  and  Incidental. 

(a)  History  is  a  proper  guide  as  to  what  constitutes  banking  busi- 
ness. 
(6)  Fundamentals,  banks  not  created  for  traffic,  but  to  receive  de- 
posits and  lend  money  for  the  accommodation  of  the  public 
and  the  profit  of  stockholders,  and  power  to  issue  money  is 
sometimes  added. 
§  48.    The  Banking  Powers. 

(1)  To  receive  deposits,  special,  specific,  and  general,  and  give  secu- 

rity.    §§  171,  191. 

(2)  To  loan  money  on  real  or  personal  security,  &c.     §§  74-76,  75  d, 

125,  128,  160,  173,  357,  753,  755,  761 ;  II.  §§  35,  129. 
§  49.  (8)  To  buy  and  sell  exchange,  coin,  and  bullion,  to  sell  its  property, 

deal  in  checks,  and  to  purchase  bills  and  notes.     §§  72,  73. 
§  50.  (4)  To  discount  negotiable  paper  and  negotiate  the  same.    §§  72,  73; 

§9,  n.  9;  §§  117,  125,  134. 
§  51.  (5)  To  give  certificates  of  deposit,  and  a  prohibition  against  issuing 

notes  to  circulate  as  money  docs  not  affect  this  power.    §§  296- 
309 ;  II.  §  78. 
§  52.  (6)  To  act  as  agent  in  some  financial  dealings,  collection,  remission, 

&c.     §§  213,  264. 
§  53.  (7)  To  issue  bank  notes,  if  the  power  is  specially  conferred.     §  633. 

Incidental  Powers. 
§  54.  Unless  restricted,  a  bank  may  do  any  act  to  accomplish  the  ends 

of  its  creation  that  an  individual  could  do  for  the  same  end. 
§  55.  Holding  real  estate,  general  rule.     §  12,  n.  4 ;  §§  74-76,  169;  II. 

§§  28,  128. 
Statutes  of  Mortmain. 
Devise. 
§  56.  Making  contracts.    §  12,  (5),  (6),  (7),  n.  3, 4,  5, 9, 10,  §§  70, 144  d,  e, 

m,  162,  169,  170,  722,  744. 
Test  of  its  power. 
Modern  tendency  is  to  liberality. 
A  contract  is  presumed  to  be  for  a  proper  purpose.     11.  §  128. 
Agreement  to  recover  stolen  deposit  good. 
§  57.  May  settle  claims. 

§  68.  May  take  goods  on  credit. 

122 


WHAT   BUSINESS    CAN   A    BANK    DO  ?  §  47 

§  59.  May  deal  in  government  securities.     National  bank  may  not  loan  on 

its  own  stock,  State  bank  may.    Any  bank  can   loan  on  other 

stocks,  but  not  buy  and  sell  them.     §§  77  a,  164 ;  II.  §  35. 
§  60.  To  save  a  debt,  may  even  carry  on  temporarily  a  foreign  business. 

§§  77  a,  b,  78. 
§  61.  Surplus   capital   may   be  used  in  other  business.     §  66.     Tax   on. 

II.  §  Ul,p,t. 
§  62.  Alienation  of  Property.     §  721. 

Gift.     §  65. 
§  63.  May  borrow  on  time  when  reasonably  necessary  in  the  conduct  of  the 

business  of  the  bank,  and  negotiable  paper  or  mortgage  security  may 

be  given.     §§  116  a,  160  a,  b. 
§  64.  May  draw  checks,  and  indorse  them,  or  any  other  paper  properly 

coming  to  it.     §§  154,  158. 
§  65.  A  bank  cannot  lend  its  credit.     It  cannot  be  a  guarantor  or  surety 

where  it  has  no  interest.     It  cannot  indorse  for  ac-    Gu.iranty. 

commodation,  but  may  warrant  goods,  or  guarantee    ^varranty. 

or  indorse  negotiable  paper.     §§  156,  158,  745  a,  748.     Accommodation. 
§  66.  Dividends,  Surplus.    §§  128,  699  e,  708,  716,  717  ;  II.  §§  33,  34,  35,  50  c, 

112,  135. 
§  67.  Abandonment  of  a  part  of  its  franchises. 

§  68.   Restrictions  on  the  Powers  of  a  Bank. 
§  69.  Express  Restrictions  as  to 

(a)  Place.     §  168. 

(6)  Time.     §  168. 

(c)  Traffic. 

(d-l),  (n,  o)      Debts  and  Loans.    §§  128,  753,  755,  761 ;  IL  §§  29,  35, 
36,  129. 

(/)  and  (m)      Real  Estate.    §  12,  n.  4,  §§  74-76, 169 ;  II.  §§  28, 128. 

(n,  o)  Interest.    §  12,  n.  15,  §§  309,  750 ;  U.  §§  30, 130, 150  c. 

(p-u)  Circulation.     §  633. 

(v)  Capital.     §§  14,  127 ;  II.,  §§  12-15,  37,  38,  81,  113. 

§  70.  (w)  Form  of  contract.    §§  12  (6),  (7),  98  L,  144,  162,  169, 

170,  722,  744. 
§  71.  Common  Law  Restrictions. 

§  47.  "What  Business  can  a  Bank  do  ?  —  The  business 
powers  of  a  bank  are  either  express  or  implied,  and  are 
conveniently  divided  into  (1st)  Primary  or  Principal,  or 
Banking  Powers,  for  the  exercise  of  which  it  is  created, 
and  (2d)  Incidental  Powers,  or  such  as  are  necessary  or 
usual  and  convenient  for  the  attainment  of  the  purposes  of 
its  creation. 

It  is  necessary  to  confer  in  distinct  terms  in  the  charter 
or  act  of  incorporation  only  those  powers  which  the  company 
could  not  otherwise  exercise,  or  those  concerning  which  there 

123 


§  47  BUSINESS   POWERS, 

might  be  some  doubt.  Various  powers  have  been  at  different 
times  dcchircd  by  the  courts  to  be  inherent,  and  to  be  prop- 
erly enjoyed  by  banking  associations  simply  by  virtue  of  their 
creation  and  existence  as  such,  and  for  the  designated  end  of 
conducting  the  banking  business.  But  powers  of  this  nature, 
being  based  only  upon  a  legal  implication,  must  be  used  only 
in  a  manner  and  for  purposes  strictly  consistent  with  such 
restrictions,  and  in  furtherance  of  such  duties  as  are  specifi- 
cally prescribed  by  law, 

(rt)  In  regard  to  matters  not  clear  upon  statute  or  binding 
decisions,  it  is  a  proper  method  of  ascertaining  what  is  legit- 
imately within  the  scope  of  the  business  of  banking,  and  what 
are  the  powers  of  corporations  formed  for  the  purpose  of 
carrying  on  that  business,  to  refer  to  the  history  of  banking 
and  the  definitions  of  lexicographers,^ 

The  powers  of  a  bank,  so  far  as  established  by  statutes 
and  decisions,  will  be  of  course  judicially  ^  noticed  by  the 
courts ;  and,  as  the  business  of  bankers  is  part  of  the  law 
merchant,  courts  judicially  notice  the  universal  custom  of 
bankers.- 

(6)  The  heart  of  the  law  of  banking  is  that  a  bank  has 
such  powers  as  are  requisite  for  the  safe  and  convenient 
attainment  of  the  purposes  of  its  incorporation,  the  chief 
of  these  being  to  provide  a  place  of  safety  in  which  the 
public  may  keep  money  and  other  valuables,  and  to  lend  its 
own   money  ^   and   that  of  others   deposited   with   it    (unless 

1  §  47.    Pattison  v.  Syracuse  National  Bank,  80  N.  Y.  94. 

So  the  existence  and  nature  of  a  corporate  power  may  sometimes  be 
even  in  this  advanced  state  of  the  law  a  question  of  fact,  though  usually 
one  of  law. 

2  In  England,  it  has  been  declared  by  Lord  Campbell  that  the  nature 
of  the  business  of  bankers  is  a  part  of  the  law  merchant,  and  will 
be  judicially  noticed  by  the  courts.  Bank  of  Australasia  v.  Breillat, 
6  Moore,  P.  C.  173.  It  is  the  same  in  the  United  States:  men  of  business 
are  presumed  conclusively  to  know  the  system  by  which  nearly  all  banks 
in  the  country  transact  monetary  affairs,  by  chocks,  drafts,  and  certifi- 
cates of  deposit,  and  courts  take  judicial  notice  of  such  customs.  British 
&  American  Mortgage  Co.  v.  Tibballs,  63  Iowa,  468. 

*  It  is  money,  not  its  credit,  that  a  bank  is  to  lend.  There  is  too 
124 


BANKS  CANNOT  ENGAGE  IN  TRAFFIC.         §  48 

specially  deposited)  for  a  frojit^  and  to  act  as  agent  in 
the  remission  and  collection  of  money.  If  it  is,  by  its 
organic  law,  a  bank  of  issue,  it  lias  one  more  fundamental 
purpose,  namely,  to  provide  the  public  with  a  convenient  cur- 
rency in  the  shape  of  promissory  notes  intended  to  circulate 
as  money. 

It  will  be  a  great  aid  to  a  clear  understanding  of  the  cases 
to  keep  these  foundation  facts  in  view,  especially  in  reading 
the  decisions  relating  to  usury.  Every  transaction  of  a  bank 
that  is  really  a  parting  with  its  money  for  a  time  is  regarded 
as  a  loan  so  far  as  usury  is  concerned,  and  the  bank  will  not 
be  allowed  to  make  more  than  lawful  interest  taken  in  ad- 
vance, although  an  individual  might  make  a  greater  profit 
by  an  exactly  similar  proceeding.  It  is  not  the  purpose  of 
banking  to  make  a  profit  by  trafficking,  as  a  merchant  does, 
but  by  allowing  the  public  to  use  the  bank's  funds  for  a  fair 
return. 

But  a  bank  is  entitled  to  receive  indemnity  for  expense  it 
incurs,  as  in  the  remission  or  collection  of  money,  and  may 
make  a  reasonable  charge  for  labor  and  service,  and  if  by  the 
express  terms  of  a  contract  the  principal  is  hazarded,  as  in 
case  of  a  bottomry  loan,  the  bank  may  charge  for  this  risk. 
These  are  none  of  them  charges  simply  for  the  use  or  forbear- 
ance of  money,  and  so  are  not  within  the  usury  laws. 

The  business  of  a  bank  is  not  "  traffic,"  or  buying  and 
selling  to  gain  by  advance  in  the  price  received  over  that 
given,  nor  speculation  of  any  kind,  but  receiving  deposits  and 
lending  money  for  the  accommodation  of  the  public  and  the 
profit  of  the  stockholders. 

This  is  the  root  from  which  grows  most  of  the  law  of 
banking. 

§  48.  The  Banking  Powers  are  those  which  are  either  fun- 
damental parts  of  the  business,  or  have  become  so  linked  with 

much  business  done  already  on  baseless  credit,  to  need  to  create  corpora- 
tions for  the  purpose.  Johnson  Bros.  v.  Charlottesville  National  Bank, 
3  Hughes,  657. 

*  A  bank  is  to  be  conducted  for  the  benefit  of  its  stockholders,  as  well 
as  for  that  of  the  public,  and  it  cannot  (unless  every  stockholder  assents) 
give  away  its  money,  or  the  use  of  it. 


§  48  BUSINESS   POWERS. 

them  as  to  be  identified  with  tlic  exercise  of  the  banking 
franchises. 

1.  A  bank  may  receive  special,^  specific,^  and  general  ^ 
deposits,  and  give  security  for  them.     See  §  G3. 

2.  Subject  to  the  usury  laws'*  and    charter    restrictions^ 
1  §  48.    In  Whitney  v.  First  National  Bank  of  Brattleboro,  50  Vt.  388, 

the  court  held  that  a  national  bank  had  no  power- to  receive  special  de- 
posits tcithoul  profit,  and  if  it  did  it  was  not  responsible  for  their  safe 
keeping,  even  though  received  with  the  acquiescence  of  directors.  The 
officer  receiving  is  the  depositor,  not  the  bank. 

In  First  National  Bank  v.  Ocean  National  Bank,  GO  N.  Y.  279,  the 
court  questioned  the  power  of  national  banks  to  receive  special  deposits, 
but  if  the  directors  sanctioned  the  receipt  of  them  the  bank  would  be 
bound.  This  was  one  degree  above  the  zero  of  logic  in  the  Vermont 
case  and  in  National  Bank  r.  Graham,  79  Penn.  106,  the  court  (disagree- 
ing expressly  with  50  Vt.)  held  that  the  directors  could  authorize  or  sanc- 
tion the  receipt  of  special  deposits  as  being  a  part  of  the  immemorial 
usage  of  banking, — indeed  it  was  the  root  from  which  grew  the  whole 
business. 

And  now  the  question  is  set  at  rest  by  the  Supreme  Court  of  the 
Conclusive  United  States  in  First  National  Bank  of  Carlisle  v.  Graham, 
decision.  jqq  jj  g^  QQQ^  where  it  is  held  that  a  National  Bank  may  re- 
ceive special  deposits  gratuitously.  §  8  of  the  National  Banking  Act 
gives  power  to  carry  on  the  business  of  banking  by  "  receiving  deposits  "; 
and  special  deposits  are  as  truly  deposits  as  any  other,  and  as  truly  a  part 
of  banking  business  as  it  is  written  down  in  the  history  and  usage  of  the 
commercial  centuries. 

Besides,  the  R.  S.  §  5228  speaks  expressly  of  the  return  of ''special  de- 
posits "  in  case  of  dissolution,  and  it  is  difficult  to  imagine  why  they 
should  be  returned  if  never  received.  The  construction  put 
R.  s.  §  5228.  ^^^  ^j^.^  ^^^,  ^j^^  g^^^g  courts,  that  it  referred  only  to  money  de- 
posited for  payment  of  notes  or  other  specific  deposits,  is  entirely  untena- 
ble; both  "  deposits  "  and  "  special  deposits,"  clearly  include  gratuitous 
bailments  for  safe  keeping,  and  the  courts  have  no  right  to  cut  them 
down  or  amputate  a  part  of  the  rights  Congress  has  given  to  national 

banks. 

2  See  §  206.     The  authority  to  receive  specific  and  general  deposits  is 

universally  admitted. 
8  See  §  288. 
*  A  bank  must  not  in  any  transaction  gain  more  than  lawful  interest 

for  the  time  it  is  out  of  its  money. 

A  clause  in  the  charter  of  a  bank  authorizing  it  to  lend  money  on  such 
terms  and  rates  as  might  be  agreed  upon,  has  been  held  not  to  convey 
authority  to  charge  a  rate  higher  than  that  allowed  by  the  general  law  of 

126 


WHAT   SECURITY   A    BANK   MAY   TAKE.  §  48 

(if  any)  a  bank  may  loan  money  on  security ,6  real  or  per- 
sonal, or  without  other  security  than  the  right  of  action 
against  the  borrower,  as  in  the  case  of  overdrafts  by  agree- 
ment with  the  directors  ;  but  this  is  looked  on  with  disfavor 
by  the  courts. 

A  national  bank  cannot  take  real  estate  "*  security  by  a  con- 
veyance to  itself  at  the  time  of  the  loan,  or  for  future  loans, 
but  only  for  debts  previously  contracted,  although  if  it  does 
take  concurrent  security  by  trust  deed,  mortgage,  <fec.,  only 
the  United  States  can  object,'  and  the  bank  can  successfully 
sustain  a  suit  for  foreclosure  unless  its  sovereign  interferes, 
though  it  exceeded  its  powers  and  violated  the  supreme  law 
of  the  land  in  taking  the  mortgaged 

the  State  regulating  interest.  Siraonton  v.  Lanier,  71  N.  C.  498;  Seneca 
Co.  Bank  v.  Lamb,  26  Barb.  595. 

6  A  Massachusetts  State  bank  must  not  have  debts  due  it  at  any 
time  to  a  greater  amount  than  double  the  capital  paid  in  (not  including 
debts  due  from  another  bank,  or  from  the  State  or  the  United  States). 
P.  S.  676. 

Either  the  capital,  or  the  capital  and  deposits,  of  the  corporation,  ac- 
cording to  the  regulations  prescribed  in  the  charter,  may  serve  as  the 
basis  upon  which  loans  and  discounts  may  be  made.  Special  deposits  can 
never  serve  as  such  basis,  or  be  included  as  a  part  of  it.  Even  where  the 
statutory  phrase  is  "  the  moneys  actually  deposited  for  safe-keeping,"  it 
will  be  construed  to  mean  only  general  deposits,  and  not  to  include 
any  description  of  such  as  are  in  fact  special.  Foster  v.  Essex  Bank,  17 
Mass.  479. 

*  A  Massachusetts  bank  cannot  make  a  loan  in  any  other  way  than  on 
demand.     It  must  be  payable  at  once,  or  it  is  void.     P.  S.  678. 

In  Pennsylvania  an  act  of  incorporation  allowed  a  corporation  to  hold 
lands  "  mortgaged  or  conveyed  to  it  in  satisfaction  of  debts  previously 
contracted."  It  was  held  that  a  conveyance  in  trust,  or  any  conveyance 
that  would  put  the  corporation  in  possession,  would  violate  the  law;  it 
could  not  take  the  title  to  the  land,  legal  or  equitable,  except  for  previous 
debts.  But  any  conveyance  merely  with  a  view  to  raising  money  by  sale 
of  the  land,  and  not  to  give  the  corporation  the  ownership,  was  good. 
Baird  v.  Bank  of  Washington,  11  S.  &  R.  411.  But  see  Chautauque  Bank 
V.  Risley,  19  N.  Y.  369. 

A   national   bank  cannot  loan  on  its  own  stock.     II.  §  35.    stock  secu- 
But  a  Massachusetts  bank  may  to  the  extent  of  one  half  the   "'^• 
paid  capital.'    P.  S.  676. 

'  See  II.  §  28.     National  Bank  v.  Matthews,  98  U.  S.  625. 

127 


§  49  BUSINESS   POWERS. 

The  practical  workings  of  this  apparently  so  unjust  rule 
are  about  the  same  as  if  the  rational  law  were  put  in  its 
place,  as  we  shall  see  when  we  come  to  speak  of  Ultra 
vires.^ 

§  49.  3.  A  bank  may  buy  ^  and  sell  exchange,^  coin,  and 
bullion,   and    unless  restricted^  it  can  sell^  any  negotiable 

8  See  §  722. 

1  §  49.    See  this  expanded,  §§  72-74. 

The  powers  treated  here  are  usually  expressly  granted,  though  they  are 
so  identified  with  the  business,  as  methods  of  carrying  out  its  fundamental 
purposes,  that  they  are  inherent. 

2  Suppose  N.  in  New  York  owes  P.  in  Paris,  it  is  expensive  to  send 
coin  across  the  water.  So  N.  finds  Y.  in  New  York,  who  is  a  creditor  of  S. 
la  Paris,  and  N.  pays  Y.  money  here,  taking  from  Y.  an  order  directed  to  S. 
to  pay  N.  or  order  the  debt  S.  owes  Y.  N.  orders  payment  to  P.  or  order, 
and  sends  the  bill  to  P.  So  two  debts  are  paid  without  transfer  of  coin. 
Now,  if  there  are  more  debtors  in  New  York  of  Paris  creditors  than  there 
are  creditors  of  Paris  debtors,  bills  on  Paris  will  be  in  demand,  and  N. 
will  have  to  pay  a  little  more  than  the  actual  coin  with  which  he  could 
pay  his  debt  if  he  had  it  in  Paris.  This  is  called  a  premium,  and  will  never 
be  more,  of  course,  than  the  cost  including  risk  of  sending  the  coin.  But 
if  there  are  more  creditors  than  debtors  in  New  York,  the  creditors  will 
compete,  and  to  save  the  expense  and  trouble  of  collecting  their  foreign 
debts  will  take  a  little  less  than  an  actual  equivalent.  This  is  called  a 
discount. 

This  premium  and  discount  are  both  called  exchange,  and  the  rate  of 
exchange  is  the  amount  of  premium  it  will  cost  to  replace  a  sum  of  money 
in  one  country  by  an  equal  sum  in  another,  or  it  is  the  difference  in  value 
of  the  same  amount  of  money  in  the  two  countries  by  reason  of  their 
distance. 

Now  the  power  of  a  bank  to  '•  buy  exchange  "  (see  II.  §  8)  means  sim- 
ply the  right  to  buy  bills  of  exchange  at  the  current  rate  of  discount  or 
premium,  and  does  not  give  power  to  buy  bills  at  any  agreed  price,  as  an 
individual  may.  It  is  the  "  exchange  "  that  is  to  be  bought  or  sold,  not 
the  bill  itself,  except  in  that  partial  meaning  of  the  word  purchase,  to 
acquire  title. 

8  A  national  bank  cannot  sell  bills  of  exchange  payable  in  another 
place  for  viore  than  the  rate  of  exchange  on  sight  drafts  plus  lawful  inter- 
est (II.  §  30),  and  no  overcharge  for  service,  risk,  or  exchange  by  any 
bank  will  be  sustained.  Merchants'  Bank  v.  Lassee,  33  Mo.  350 ;  Bank 
of  United  States  v.  Davis,  2  Hill,  451.  Bills  payable  in  the  same  place 
will  not  be  apt  to  sell  for  more  than  their  value:  men  will  not  give 
$100  cash  for  §50  in  the  same  place,  and  there  seems  to  be  no  rea- 
son why  banks  should  not  have  the  power  to  sell  negotiable  paper 
128 


PURCHASE   OF   NEGOTIABLE   PAPER. 


§49 


paper  or  otlier  property  to  which  it  has  properly 
acquired  a  title ;  but  whether  it  can  purchase 
neijotiahle  paper  is  one  of  those  questions  that 
has  got  tangled  up  in  the  double  meanings  of 
words,  as  well  as  having  inherent  difficulties,  and 
has  been  much  litigated. 

Purchase  is  used  in  two  senses  :  1st,  simply  to 
indicate  acquirement  of  title  by  any  means  other 
than  descent;  2d,  to  indicate  that  sort  of  transac- 
tion which  among  individuals  is  not  subject  to  the 
control  of  usury  laws. 

If  this  distinction  is  kept  in  mind  the  cases  on 
this  subject  become  clear. 

(a)  If  A.  gives  B.  money,  and  B.  gives  A.  Jiis 
note  for  the  debt,  this  is  a  loan,  not  a  purchase  in 
the  second  sense,  and  must  not  violate  the  usury 
statutes. 

(6)  If  A.  transfers  B.'s  note  to  C.  by  indorse- 
ment generally,  so  that  A.  becomes  bound  on  the 
note,  there  is  great  conflict  of  opinion  whether  it 
is  to  be  considered  a  sale  or  a  loan  as  to  usury. 
The  best  opinion  is,  that,  as  the  statutes  against 
usury  aj>ply  only  to  loan  or  forbearance  of  money, 
and  as  they  are  to  be  construed  strictly,*  such  a 


Purchase. 
Sale. 
Discount. 
Negotiate. 
Transfer. 
A  bank  may 
buy  negotia- 
ble pa[)er  in 
the  sense  of 
aciiuiring 
absolute  title 
to  it,  but  is 
not  free  as 
to  price,  as 
an  indi- 
vidual is. 
If  a  national 
bantc  passes 
money  to  A. 
and  takes 
A.'s  own 
note,  or  the 
note  of  B. 
^indorsed  by 
A.;  either 
generally  or 
without  re- 
course, the 
bank  must 
not  gain 
more  than 
what  would 
be  lawful 
interest  for 
money  in 
anv  case. 
II."§  30. 

But  if  it  does 
buy  or  loan 
so  as  to  gain 
more,  its 


they  may  hold  for  as  much  less  than  its  face  as  the  parties  may  agree, 
just  as  individuals  may;  but  the  distinctions  as  to  what  are  sales  and 
what  are  loans  must  be  carefully  attended  to.  (See  text  following  this 
reference.) 

Unconstitutional  Restriction.  —  A  State  declaring  "  it  shall  not  be 
lawful  for  any  bank  to  transfer  any  note,  or  other  evidence  of  debt," 
is  unconstitutional,  as  to  banks  already  in  possession  of  such  power. 
Planters'  Bank  v.  Sharp,  6  How.  301. 

*  They  are  relics  of  barbarous  ages,  when  men  did  not  know  that  the 
use  of  money  was  as  valuable  a  consideration  as  the  use  of  land,  and  they 
are  to-day  mere  weapons  with  which  revenge  and  bad  faith  mav  bruise 
the  friend  who  has  aided  them.  Men  make  no  greater  charge  tii.an  the 
laws  of  nature  proclaim  the  money  is  worth,  and  that  will  continue  to 
be  charged  and  obtained,  though  the  legislature  devote  themselves  exclu- 
sively to  preventing  it.  A  usury  law  is  a  blot  upou  the  statute-books  of 
any  State. 

VOL.  I.  9  ]^29 


§  49  BUSINESS   POWERS. 

title  to  the  transfer  (unless  a  mere  cloak  for  usury  ^),  not  in- 

riYected.""  volviug  auv  primary  liability  of  A.,  is  not  a  loan, 

.knv'its't'irie  but   differs  therefrom  in  the   fact  that  C.  cannot 

ul'it'd  claim  the  money  unconditionally  of  A.,  but  must 

States.  -with   due   dilii^ence   pursue    B.,  and  the  risk  and" 

A  State  bank  •         i       i    •       - 1  •      •  •  i.      i.  •  ^ 

may  by  its  cxpcnsc  nivolvcd  HI  this  IS  au  important  consider- 
be^abiuto^*  ation  additional  to  what  occurs  in  case  of  a  loan, 
puRiia>e  as     jjj^j  j^r^y  ^.^jj^  ]jq  takcu  luto  accouut  in  the  price 

an  iiulivulual        ,  "^  ^ 

cau.  of  transfer.^ 

^  As  it  would  be  if  B.  gave  his  note  to  A.  for  the  accommodation 
of  the  latter,  receiving  no  value,  and  C,  knowing  this  fact,  bought  at 
greater  discount  than  allowed  by  law  on  loans,  for  in  effect  tliis  is  lend- 
ing money  on  B.'s  promise  to  pay  a  sum  so  much  greater  as  to  make  it 
usurious.  A.  is  not  a  real  party  iu  the  matter.  Whitworth  v.  Adams, 
5  Hand.  383. 

6  National  Bank  of  Michigan  v.  Green,  33  Iowa,  141  (1871)  ;  State 
Bank  v.  Coquillard,   6  Ind.  232.     This  is  the  opinion  of  Pi-of. 

usury. 

Parsons,  2  N.  &  B.  429,  (see  also  2  Contracts,  42."^,)  and  of 
Daniel,  Neg.  Inst.  623.  And  so  far  as  it  narrows  usury,  it  is  the  best 
opinion;  the  fact  is,  however,  that  all  distinctions  on  usury  are  irrational. 
If  it  did  not  make  such  terrible  confusion  and  useless  litigation,  it  would 
be  ludicrous  to  see  how  the  judges  flounder  about,  and  put  down  all  sorts 
of  inconsistencies  in  the  reports,  trying  to  determine  what  constitutes  the 
sin  of  usury. 

A  bank  lends  A.  money,  and  takes  B.'s  note  for  it  indorsed  by  A.  This 
is  just  the  same  as  if  A.  kept  B.'s  note  and  gave  the  bank  his  own  for 
the  same  time,  except  that  the  bank  instead  of  A.  now  has  the  trouble 
and  expense  of  collecting  from  B. 

If  A.  indorses  without  recourse,  still  (supposing  B.  to  be  as  good  as  A. 
and  as  near)  as  to  the  bank  the  transaction  is  exactly  the  same  as  if  it 
took  A  's  note  ;  the  bank  has  parted  with  so  much  money  for  a  time 
certain,  on  the  promise  of  some  one  to  pay  it. 

Kow  if  the  object  of  usury  laws  is  to  prevent  the  owner  of  money  from 
making  more  than  a  certain  per  cent  (say  six),  by  foregoing  possession 
of  it,  then  all  sales  and  indorsements  by  which  the  person  who  pays  the 
money  will  reap  a  return  of  more  than  six  per  cent  are  usurious. 

If,  however,  the  purpose  of  usury  laws  is  to  prevent  oppression  of  the 
one  to  whom  the  money  is  paid,  then,  as  it  cannot  be  oppression  to  take 
for  a  thing  what  it  is  really  worth  to  him  and  to  others,  (and  any  law 
which  compels  one  to  take  less  for  the  use  of  his  property,  or  for  giving  up 
his  rights,  than  they  are  fairly  worth,  is  unjust,  as  it  takes  away  property 
from  one  and  gives  it  to  another  without  a  full  equivalent,)  it  follows 
that,  if  six  per  cent  is  proper  for  A.  to  pay  for  the  use  of  the  money  when 

130 


PURCHASE  OF  NEGOTIABLE  PAPER,  §  49 

The  same  applies  to  the  transaction  between  the  But  as  it  is 

drawer  and  payee  of  a  bill  of  exchange  :  the  drawer  "an'k1ng° 

is  only  secondarily  liable.  '''ti4"nc'''*in 

But  in  other  States  such  a  transfer  by  indorse-  merc'mndise 

•'  or  tinancial 

ment  is  held  to  be  usurious ;   some  allowing  the   securities, 

•       II-       ""'^  **  ^^^ 
holder  to  recover  agamst  all  parties  but  the  m-   fundamental 

dorser ; '  others  hold  that  the  transfer  is  void,  gives   of  the  tilree 

no  title,  and  no  recovery  is  possible.^  mf,\lhing'^ 

((?)    If  A.  transfers  B.'s  paper  to  C.  by  delivery   paper  is  the 

^    ^  ^1  J  J      same  as  re- 

(if  it  is  payable  to  bearer),  or  by  indorsement  with-  e^rds  the 

,.,1,  ,  hniik,  the 

out  recourse,  this  (unless  merely  a  cover  for  usury)    tendency  is 

he  gives  his  own  note,  it  is  proper,  and  not  oppressive  for  him,  to  pay  a 
little  more  when  he  indorses  over  B,'s  note,  instead  of  giving  his  own  and 
keeping  B.'s,  for  he  thereby  is  relieved  of  the  trouble  and  expense  of 
collecting  B,'s  note;  and  when  he  indorses  without  recourse,  he  may 
properly  pay  a  little  more  yet,  for  the  risk  of  B.'s  insolvency  is  removed 
from  him;  and,  carrying  out  the  analysis,  if  he  can,  by  using  the  money, 
draw  from  the  bosom  of  the  earth  twenty  or  forty  per  cent  return  more 
than  he  could  without  it,  why  is  it  oppression  to  ask  him  twelve  or 
fifteen  per  cent  ? 

What  gentle  oppression  it  is  to  ask  one  half  of  the  gain  my  money 
has  enabled  him  to  realize,  and  which  I  might  myself  have  obtained  I 
No,  the  oppression  is  in  taking  away  the  liberty  of  contract,  and  saying 
to  me,  "No  matter  how  great  return  your  money  may  bring,  nor  what  the 
variations  in  risk,  you  can  never  take  more  than  six  per  cent." 

The  fact  is,  that  the  use  of  power,  whether  it  be  in  the  shape  of  money, 
lands,  or  goods,  ought  to  be  paid  for  at  its  fair  value,  which  varies  with 
the  circumstances  of  every  case. 

Usury  laws  are  built  on  no  firmer  foundation  than  fog,  and  in  the  light 
of  analysis  vani.sh  like  the  meadow  mists  in  the  morning  sun.  All  that  is 
necessary  for  protection  against  extortion  is  the  rule  that  applies  to  all 
contracts,  namely,  that  gross  inadequacy  of  consideration  is  evidence  of 
fraud.  Conscienceless  advantage  must  not  be  taken,  nor  in  case  of  a  hona 
fide  contract  should  improvidence  or  weak-mindednesss  (except  of  chil- 
dren and  married  women)  be  protected  or  kept  from  exterminating  itself. 
The  common  law  and  equity  are  adequate,  and  the  real  effect  of  usury 
laws  is  to  make  honest  men  pay  more  for  their  money  than  they  ought,  in 
order  to  cover  losses  that  may  occur  through  advantage  being  taken  of  the 
usury  statutes  by  rascality. 

''  Collier  v.  Nevill,  3  Dev.  31.  No  intermediate  illegality  can  affect 
the  liability  of  maker  or  acceptor.     Armstrong  v.  Gibson,  31  Wis.  61. 

8  Whitworth  i\  Adams,  5  Rand.  419. 

131 


§  41)  BUSINESS   POWERS. 

to  hold  the  ^^  ^  ssde,  and  may  be  for  any  price  on  wliich  tlin 
bank  u])  to      partics  affrcc/-' 

the  usurv  -.j  i  .  .       ^ 

staiuiard  in         ^ow  tlio  qucstion  IS,  Can  a  bank  purchase  nego- 

tions.'  '         tiable  paper  as  a  private  individual  may? 

If  it  trans-  First,  it  is  clear  that  a  bank  may  purchase  in 

gresses,  most  •'     ^ 

States  iioia     tlie  sense  of  acquirinji;  title ;    a  note  is  deposited, 

its  title  as  to  t       ,  i  i     i  •  •,  ,     . 

prior  iiarties  Credited  as  cash,  and  drawn  agamst;  the  bank  is  a 
^°°  ■  liolder  for  value  ;  discounting  even  in  its  most  lim- 

ited sense,  that  of  mere  lending,  gives  title,  and  buying  ex- 
change involves  purchase  of  bills  of  exchange.     11.  §  30. 

Second,  a  bank  maj/  have  power  to  purchase  at  any  agreed 
price,  according  to  the  terms  of  its  organic  law ;  but  it  may 
be  laid  down  as  an  almost,  if  not  quite,  universal  principle, 
that  all  transfers  of  negotiable  i)apcr  to  a  bank  are  subject 
to  usury  laws,  and  that  it  has  no  right  to  take  paper  at  a 
greater  reduction. 

Third,  if  a  bank  does  take  at  a  greater  discount,  then  in 
case  of  a  State  bank  the  consequence  may  be  that  it  cannot 
recover  on  the  paper,  the  transaction  being  held  void,  or  it 
may  be  able  to  recover  as  to  all  prior  parties,  and  only  liable 
to  the  immediate  transferrer.  In  the  case  of  a  national 
bank,  the  best  opinion  is  that  a  transfer  in  either  of  the 
ways  a,  b,  c,  above,  may  be  made  ;  and,  if  usurious,  the  pen- 
alty prescribed  by  the  National  Banking  Act  is  the  only  con- 
sequence ;  the  bank's  title  is  not  affected,  and  i)rior  partics 
may  be  held. 

But  ill  JMaryland  and  Minnesota  it  has  been  held  that 
"  discounting  "  docs  not  include  any  transaction  l)ut  a  loan ; 
therefore  a  national  bank  has  no  power  to  acquire  title  by 
transfer  without  recourse,  or  in  any  way  in  which  the  trans- 
ferrer is  not  responsible,  and  that  such  transfer,  being  ultra 
vires,  gives  no  title,  and  the  bank  cannot  recover  on  the  paper. 
These  are  however  in  both  branches  reasonless  decisions, 
and  as  to  the  latter  point  Minnesota  has  altered  her  mind, 
and  in  Maryland  the  dissent  was  much  stronger  than  the 
opinion,  and  the  later  decision  in  57  Md.  128,  is  inconsist- 
ent with  the  Lazear  case.     (See  Ultra  vires,  §  722.) 

^  Nicholes  r.  Pearson,  7  Pet.  109. 
132 


DISCOUNTING.  §  50 

The  word  discount,  by  the  usage  of  the  commercial  world 
and  the  common  voice  of  all  the  dictionaries,  means  simply 
to  buy  at  a  reduction,  and  a  loan  is  only  one  species  of  dis- 
count. It  needs  only  to  look  at  the  National  J3anking  Act 
to  see  that  Congress  used  the  word  in  its  broad  sense.  If 
it  means  only  loan,  then  it  is  useless  in  the  eighth  section ; 
for  the  clause  giving  power  to  loan  money  on  personal  secu- 
rity covers  it.  The  thirtieth  section  provides  a  penalty  for 
any  usurious  transaction ;  but  it  has  been  repeatedly  held 
that  transactions  in  violation  of  this  section  are  not  void, 
and  the  defect  can  be  taken  advantage  ^°  of  in  no  other  way 
than  the  one  there  provided.  And  even  though  the  act  did 
not  give  power  to  take  by  absolute  transfer,  the  weight  of 
authority  and  reason  is  that  recovery  can  nevertheless  be  had 
on  the  paper. 

See  for  the  expansion  of  this  matter,  §  48;  and  for  the  last 
point,  see  Ultra  vires,  §  722.     See  also  §  61. 

§  50.  4.  A  bank  may  discount  (i.  e.  deduct  from  the  face 
of  the  debt  the  amount  of  lawful  interest  on  its  face  from  the 
time  of  taking  by  the  bank  till  maturity)  and  nego-  Discount, 
tiate  (i.e.  "transfer,  sell,  pass,"  sometimes  further  Negotiate. 
meaning  "  procure  by  arrangement  with  another,  settle  by, 
and  arrange  for")  bills  of  exchange,  notes,  and  other  evi- 
dences of  debt.  These  are  inherent  powers  identified  with 
banking  as  necessary  and  convenient  methods  of  carrying  out 
its  fundamental  purpose  of  lending  money.  Discounting  is 
a  part  of  the  general  business  of  banking,  and  could  be  done 
even  without  specific  authority  conferred  in  the  incorporating 
act.i  The  holding  back  of  interest  in  advance  is  implied  in 
the  phrase  itself ;  it  is  a  part  of  the  definition  of  the  word. 
But  the  bank,  though  it  can  thus  secure  a  slight  increase  in 
the  actual  amount  of  money  which  it  receives  in  payment  for 
the  use  of  its  funds,  can  do  it  in  no  other  shape  and  to  no 
greater  extent  than  precisely  this.^     Though  if  the  princi- 

10  Gates  V.  First  National  Bank  of  Montgomery,  100  U.  S.  239  ;  Na- 
tional Exchange  Bank  r.  Moore,  2  Bond,  170.     See  Usury,  II.  §  131. 

1  §  50.    Fleckner  t'.  Bank  of  United  States,  8  Wheat.  338. 

2  It  may  take  not  one  particle  more  than  the  legal  rate  of  interest,  but 

133 


§  51  BUSINESS   POWERS. 

pal  is  risked  expressly  (i.  c.  its  payment  made  to  depend 
ou  a  coutingent  event),  the  bank  can  charge  extra  for  this 
risk. 2 

§  51.  5.  As  involved  in  the  power  to  receive  deposits,  a 
bank  may  issue  certilicates  of  dej)osit,  which  in  Massachusetts  ^ 
Certificate  of  ^nd  Pennsylvania  ^  are  not  regarded  as  negotiable 
deposit.  paper;  but  in  other  States^  they  are  considered 
promissory  notes,  (which  seems  clear  upon  any  definition*  of 
a  note  to  be  found  in  the  authorities,)  negotiable  under  the 
same  limitations  ^  as  notes. 

it  may  discount,  that  is  to  say,  "  count  off,"  and  keep  this  out  of  its  pay- 
ment at  tlie  time  wlien  it  hands  over  the  bakxnce  of  the  loan  to  the  bor- 
rower. This  is  the  meaning  and  the  only  meaning  of  the  words  "  upon 
banking  principles,"  or  "according  to  banking  principles  and  usages," 
sometimes  appended  to  the  word  "  discount  "  in  charters  and  organic 
laws.  The  addition  signifies  nothing  more  than  the  word  "discount" 
■would  alone  imply,  and  is  in  fact  mere  surplusage.  IMcLean  v.  Lafay- 
ette* Bank,  3  McLean,  587;  Creed  v.  Commercial  Bank,  11  Ohio,  489. 
No  court  will  support  the  reservation  of  more  than  the  legal  rate  of  in- 
terest, upon  the  ground  that  this  excessive  rate  is  customarily  reserved 
by  all  the  banks  in  the  neighborhood.  Niagara  County  Bank  v.  Baker, 
15  Ohio  St.  68;  New  York  Firemen's  Ins.  Co.  v.  Ely,  2  Cow.  at  p.  707; 
Dunham  v.  Gould,  IG  Johns.  307. 

Custom  cannot  vary  statute.     At  least  no  baby  custom.     An  old,  full- 
grown  custom  may,  like  that  of  discount  itself,  which  is  a  real,  substan- 
tial inroad  on  the  usury  law,  and  only  sanctioned  because  the  common 
sense  of  the  judges  is  superior  to  their  respect  for  the  statute;  as  is  shown 
again  in  cases  where  repayment  is  made  expressly  to  depend 

Contingency.       "  ^  /  *^   ,       •'  ,         . 

on  contingent  events,  as  loans  on  bottomry  and  respondentia. 
Thorndike  v.  Stone,  11  Pick.  183. 

1  §  51.    Shute  V.  Pacific  National  Bank,  13G  Mass.  488,  Coburn.  J. 

2  Gillespie  v.  Mather,  10  Pa.  28;  Patterson  v.  Poiudexter,  6  Watts  & 
Serg.  227. 

8  Minnesota,  Michigan,  North  Carolina,  Iowa,  Georgia,  Vermont, 
Connecticut,  Illinois,  AVisconsin,  Indiana,  Alabama,  and  California.  The 
United  States  Supreme  Court  also  held  a  certificate  of  deposit,  "  paya- 
ble to  order  upon  return  of  this  certificate,"  to  be  negotiable.  Miller  v. 
Austen,  13  How.  918.     See  §  29G. 

^  A  promissory  note  "is  an  open  promise  in  writing  by  one  person  to 
pay  anotlier  thei-ein  named,  or  to  his  order,  or  to  bearer,  a  specified  sura 
of  money,  absolutely  and  at  all  events."     Daniel,  Neg.  Inst.,  §  28. 

^  Of  cour.se,  if  it  is  payable  in  "  current  funds,"  or  anything  else  than 

134 


CERTIFICATES   OF   DEPOSIT.  §  51 

They  arc  used  to  save  carrying  money ;  but  as  they  do  not 
pass  by  delivery,  but  only  by  indorsement,  they  are  not  in- 
tended to  circulate  as  money  in  the  sense  of  a  banking  law, 
such  as  the  National  or  New  York  law,  and  therefore  the  pro- 
hibition in  those  acts  of  issuing  notes  to  circulate  as  money 
other  than  those  provided  for  or  named  in  said  acts,  does 
not  interfere  with  the  power  of  a  bank  to  issue  certificates  of 
deposit.^ 

They  may  be  payable  on  demand,  or  on  time,  if  the  cir- 
cumstances justify  the  bank  in  borrowing  on  time  (see  §  63), 

money,  it  may  not  generally  be  held  negotiable  (otherwise  in  Indiana  and 
New  York).  The  words  "value  received"  are  necessary  in  Missouri. 
International  Bank  v.  German  Bank,  3  Mo.  App.  367.  If  there  are  no 
words  of  promise,  it  is  a  simple  receipt. 

The  words  "on  return  of  this  certificate"  do  not  affect  the  contract 
as  to  negotiability;  it  creates  no  further  condition  than  is  attached  to  an 
ordinary  note,  except  perhaps  the  statute  of  limitations  does  not  run  until 
demand  made.     See  §  296. 

6  Miller  v.  Austen,  13  How.  218 ;  Pelham  v.  Adams,  17  Barb.  384. 

"A  certificate,  issued  by  a  national  bank,  stating  that  a  person  named 
has  deposited  in  the  bank  a  certain  sum,  payable  to  the  order  of  himself 
on  the  return  of  the  certificate  properly  indorsed,  and  understood  between 
the  bank  and  the  depositor  not  to  be  payable  until  a  future  day  agreed 
upon,  is  not  in  violation  of  the  United  States  Rev.  Stats.  §  5183,  forbid- 
ding national  banks  to  issue  any  other  notes  to  circulate  as  money  than 
such  as  are  authorized  by  its  provisions. 

"If  the  United  States  Revised  Statutes  forbade  the  issue  of  any  other 
notes  whatever  than  such  as  were  therein  authorized,  it  would  be  diffi- 
cult to  hold  this  certificate  to  be  legal.  Miller  ».  Austen,  13  How.  218. 
But  assuming  that  it  might  fall  within  the  general  designation  of  a 
note,  it  cannot  be  considered  as  a  note  intended  to  circulate  as  money, 
within  the  meaning  of  the  statute.  It  requires  to  be  indorsed.  It  was 
understood  not  to  be  payable  till  a  certain  future  date.  It  is  not  in  a 
sum  adapted  for  general  circulation  as  money.  The  form  of  the  instru- 
ment, and  the  incidents  above  mentioned,  show  that  it  was  not  intended 
to  circulate  as  money  between  individuals,  and  between  government 
and  individuals  for  the  ordinary  jiurposes  of  society.  Craig  v.  Missouri, 
4  Pet.  410,  432;  Briscoe  v.  Kentucky  Bank,  11  Pet.  257,  314,  318; 
Virginia  Coupon  Cases,  114  U.  S.  269,  284.  See  also  Merchants' 
Bank  v.  State  Bank,  10  Wall.  604,  648;  where  it  was  held  that  certified 
checks  do  not  fall  within  a  similar  prohibition."  Hunt,  appellant,  141 
Mass.  515. 

135 


§  52  BUSINESS  POWERS. 

unless  there  is  a  restriction  ^  in  tlic  organic  law  or  by  statute. 
If  a  bank  cannot  issue  its  negotiable  promissory  note  on  time, 
neither  can  it  issue  a  negotiable  certificate  of  deposit  of  this 
description.  If  the  note  would  be  void,  so  likewise  is  the 
certificate.  If,  however,  the  bank  is  emi)owcred  to  issue 
promissory  notes,  subject  only  to  the  restriction  that  it  shall 
issue  none  which  are  designed  to  pass  into  circulation  as 
currency,  but  only  such  as  become  necessary  in  the  ordinary 
course  and  conduct  of  its  affairs,  and  are  strictly  business 
paper,  then  it  may  issue  certificates  of  deposit,  whether  paya- 
ble on  demand  or  otherwise,  subject  only  to  the  same  restric- 
tion. By  reason  of  the  case  with  which  such  instruments 
may  be  used  for  circulation,  the  courts  have  often  been  rigid 
in  scrutinizing  them,  and  ajiplying  the  strict  letter  of  the  law 
to  them ;  but  they  have  never,  that  Ave  have  found,  substan- 
tially modified  or  departed  from  the  general  principles  above 
laid  down.^ 

§  52.  6.  A  bank  may  act  as  agent  in  some  financial  deal- 
ings, as  receiving  money  to  pay  notes,^  engaging  to  remit  ^ 
Bank  as  ov  collcct  money ,1  and  procuring  and  exchanging 
agent.  government  securities.^     The  bank  can  charge  for 

'  By  Mass.  P.  S.  G77,  no  promise  to  pay  money  at  a  future  day  certain 
can  be  issued  by  a  bank,  except  for  money  borrowed  of  the  State  or  a 
Massachusetts  savings  bank,  or  for  money  deposited  by  an  assignee  of 
insolvency.  Under  a  statute  against  the  circulation  of  bills  and  notes  not 
payable  on  demand,  a  bank  has  no  power  to  issue  time  certificates  of 
deposit,  and  if  it  does  they  are  void. 

8  Curtis  V.  Leavitt,  15  N.  Y.  19  ;  Leavitt  v.  Palmer,  3  Comst.  19  ; 
Barnes  v.  Ontario  Bank,  19  N.  Y.  152  ;  Bank  of  Orleans  v.  Merrill,  2 
Hill,  295  ;  Southern  Loan  Co.  v.  Morris,  2  Barr,  175  ;  Craig  v.  State  of 
Missouri,  4  Pet.  433;  Kilgore  v.  Bulkley,  14  Conn.  362;  Laughlin  v. 
Marshall,  19  Til.  390;  Bank  of  Pennsylvania  v.  Farnsworth,  18  id.  503; 
Lindsey  r.  McClelland,  18  Wis.  481  ;  White  v.  Franklin  Bank,  22  Pick. 
181;  Bank  of  Chillicothe  v.  Dodge,  8  Barb.  233;  Bank  Cuniniissioiiers  v. 
St.  Lawrence  Bank,  3  Seld.  513;  Cate  v.  Patterson,  25  Mich.  191;  Pardee 
V.  Fish,  60  N.  Y.  265;  Miller  v.  Austen,  13  How.  (U.  S.)  218;  Poorman  v. 
Mills,  35  Cal.  118,  and  other  California  cases  therein  cited. 

1  §  52.  See  Specific  Deposit,  §  206.  Collecting  is  part  of  the  banking 
busine.ss.     Ty.son  v.  State  Bank,  6  Blackf.  225. 

2  A  national  bank  can  deal  in  and  exchange  government  securities. 

136 


THE   BANK    AS   AN    AGENT.  §  54 

these  services ;  but  in  these  dealings,  as  in  others,  the  courts 
will  see  that  a  bank  does  not,  under  cover  of  a  charge  of 
service,  obtain  more  than  lawful  interest  for  the  use  of  its 
money. 

If  a  bank  undertakes  to  remit  to,  or  to  collect  in,  a  distant 
place,  it  has  a  right  to  charge  a  reasonable  sum  to  cover  the 
rate  of  exchange,  and  the  labor  and  risk  to  which  it  may  be 
put.^  Such  a  charge,  though  in  the  form  of  a  percentage,  is 
not  interest,  and  is  not  usurious.  But  it  must  be  made  bona 
fide.  If  the  charge  for  labor  or  risk  is  excessive,  or  if  charges 
are  made  for  exchange  when  the  bank  is  not  really  obliged 
to  pay  anything  on  this  account,  or  if  credit  is  not  given 
for  exchange  where  nevertheless  the  bank  actually  receives 
something  on  account  of  it,  then  the  form  of  the  charge  will 
be  regarded  as  only  colorable,  and  it  will  be  considered  that 
usurious  interest  has  been  taken  or  reserved.* 

§  53.     7.  A  bank  has  no  inherent  authoi'ity  to  issue  bills  ^ 
or  notes  designed  to  circulate  as  money.     It  is  unlike  those 
powers  previously  considered  in  this  section ;  the   issuing 
right  must  be  expressly  given.     II.  §§  8, 21.  ^^"'^  °°t^^- 

Such  notes  7nust  be  negotiable  by  mere  delivery,  payable 
immediately  on  demand,  in  business  hours,  at  any  time  after 
issue,  and  without  interest. 

§  54.  Incidental  Powers  of  Banks  are  such  as  are  neces- 
sary or  convenient  in  the  conduct  of  the  business  set  forth 
above,  but  not  themselves  so  continuously  or  peculiarly  es- 
sential to  the  attainment  of  the  fundamental  objects  of  the 

Van  Leuven  v.  First  National  Bank,  .54  N".  Y.  671.  Buying  United  States 
bonds  is  highly  meritorious,  as  they  are  intended  to  enable  the  government 
to  raise  money,  and  banks  have  so  long  acted  as  agents  of  the  United 
States  Treasury  in  the  business  of  investing  their  own  as  well  as  cus- 
tomers' money  in  government  bonds,  without  objection  from  directors  or 
stockholders,  and  with  the  sanction  of  the  general  government,  that  it 
would  be  unjust  now  for  the  courts  to  hold  the  business  ultra  vires. 
Caldwell  v.  National  Mohawk  Valley  Bank,  64  Barb.  333. 

8  Merchants'  Bank  v.  Lassee,  33  Mo.  350. 

*  Bank  of  the  United  States  v.  Davis,  2  Hill,  451. 

1  §  53.  See  chapter  on  Bank  lUlls,  §  033,  and  11.  §  21,  and  Mass.  P.  S. 
681,  as  to  bank  notes  of  a  State  bank. 

137 


§  55  BUSINESS   POWERS. 

corporation  as  to  be  considered  a  part  of  the  business  of 
banking. 

It  is  a  general  principle  that,  for  the  purpose  of  accomplish- 
ing the  objects  of  its  creation,  a  corporation  may  act  and  deal 
General  prin-  in  the  Same  manner  that  a  natural  person  would, 
Resti"iLtk)ns  ^f  lie  sought  to  accomplish  the  same  end.  It  may 
§  G8.  borrow  money  for  those  purposes,  contract  for  labor 

and  materials,  make  purchases,  and  give  notes,  bills,  bonds, 
and  mortgages  in  payment  or  as  security  therefor.^ 

Proceedings,  though  such  as  are  usually  ultra  vires,  will  be 
proper  if  they  are  (1)  necessitated  by  circumstances  essential 
to  the  corporate  well-being,  (2)  could  not  have  been  foreseen  to 
be  necessary  at  the  inception  of  the  corporation,  (3)  are  not 
expressly  forbidden,  (4)  do  not  amount  to  a  course  of  dealing, 
but  are  matters  of  temporary  management.  As  if  a  banker 
lends  money  on  a  ship  and  freight,  and  is  obliged  to  foreclose 
his  security,  he  may,  and  should  as  a  prudent  man,  operate 
the  ship  temporarily.     See  §  78. 

§  55.  The  statutes  of  mortmain  took  away  the  common  law 
power  of  holding  real  estate.  By  it  "  all  conveyances  by  deed 
Hoidiii"  real  or  wiU  of  realty  to  a  body  corporate,  or  for  its  use, 
estate.  ^j.^  void,  uulcss  Sanctioned  by  charter   or  act   of 

Assembly."  ^  This  is  law  in  Pennsylvania,  but  in  other  States 
a  corporation  may  acquire  and  hold  real  estate  so  far  as  is 
necessary  and  convenient  for  the  ])urposes  of  their  creation ; 
but  not  for  objects  wholly  foreign.^ 

Power  is  usually  expressly  given  to  own  realty  sufficient 
for  a  place  of  business.^  A  national  bank  cannot  take  realty 
as  concurrent  ^  security  for  a  loan,  but  may  as  a  substantially 
subsequent  security,  and  State  banks  are  sometimes  restricted 
in  the  same  way.     Any  bank  may  take  real  estate  to  save  a 

1  §54.  Frye  v.  Tucker,  24  111.  180;  Smith  v.  Law,  21  N,  Y.  299; 
Clark  V.  School  District,  3  R.  I.  199. 

1  §  55.    3  Binney,  App.  626, 

2  First  Parisli  in  Sutton  v.  Cole,  3  Pick.  239;  State  v.  Commissioners 
of  Mansfield,  3  N.  J.  500;  Riley  v.  City  of  Rochester,  5  Seld.  64.  See 
§  72  et  seq. 

8  II.  §  28.    And  the  courts  are  very  liberal  iu  their  construction  of  such 
authority.     See  §  49. 
138 


IMPLIED    POWERS   OF    CONTRACT.  §  56 

debt,  and  may  sell  any  realty  to  which  it  acquires  title.  The 
effect  of  exceeding  its  powers,  and  buying  or  taking  land 
beyond  its  authority,  is  usually  in  this  country  no  more  than 
the  risk  of  forfeiture  of  franchise  at  suit  of  the  sovereign. 
The  title  is  good.     §§  74,  7'22. 

A  corporation  may  receive  personal  property  by   Uequcst. 
bequest.* 

§  56.  A  bank  has  power  to  make  all  such  contracts  as  are 
necessary  or  usual  as  direct  means  ^  to  attain  the   contracts. 
objects  of  its  incorporation,  and  no  other.  tions.^os. 

"  In  deciding  whether  a  corporation  can  make  a  pai-ticular 
contract,  we  are  to  consider,  in  the  first  place,  whether  its 
charter,  or  some  statute  binding  upon  it,  forbids  xr-st  of  right 
or  permits  it  to  make  such  contract.  And,  if  the  '« i"""'>^t- 
charter  and  valid  statute  law  are  silent  on  the  subject,  in 
the  second  place,  whether  the  power  to  make  such  a  contract 
may  not  be  implied  on  the  part  of  the  corporation,  as  directly 
or  incidentally  necessary  to  enable  it  to  fulfil  the  purpose  of 
its  existence,  or  whether  the  contract  is  entirely  foreign  to 
that  purpose."  ^ 

The  modern  tendency  is  to  liberal  construction  of  corpo- 
rate power  to  contract.     The  English  decisions  are 

1  ./...,  Modern  ten- 

clear  that,  prima  facie^  all  its  contracts  are  valid,   dency  lib- 

and  the  burden  is  on  the  party  objecting  to  show 

that  the  law  by  which  it  is  created  expressly  or  by  necessary 

*  The  common  law  right  of  taking  personal  property  by  bequest  was, 
we  believe,  always  enjoyed  by  corporations  equally  with  individuals,  and 
a  bequest  to  a  corporation  of  its  own  stock  is  as  valid  as  a  bequest  of  any- 
thing else.  Atk.  R.  37;  2  Bro.  58;  Phillips  Academy  v.  King,  12  Mass. 
546 ;  In  the  Matter  of  Howe,  1  Paige,  Ch.  214  ;  IMcCartee  v.  Orphan 
Asylum  Society,  9  Cowen,  437  ;  Rivanna  Navigation  Co.  v.  Dawson, 
3  Gratt.  19. 

^  §  5G.  If  the  means  are  reasonably  and  directly  adapted  to  the  ends  for 
which  the  bank  exists,  they  are  proper;  but  indirect  means  are  not  allow- 
able, though  they  aid  the  same  ends;  e.  g.  a  bank  cannot  buy  and  sell 
stocks  to  raise  money  to  lend  or  to  retrieve  its  fortunes,  nor  engage  in  any 
outside  business  or  securities  except  to  save  debt,  or  invest  surplus,  nor 
purchase  land  to  prevent  competition. 

2  Angell  &  Ames  on  Corporations,  §  256. 

139 


§  5G  BUSINESS   POWERS. 

implication  proliibits  it;  and  the  drift  in  the  United  States  is 
in  the  same  direction,  away  from  the  strict  rule  that  held  the 
power  limited  to  that  conferred  or  necessarily  implied.^ 

1.  AVhen  the  charter  of  a  corporation  authorizes  it  to  pur- 
chase land  for  some  specified  purpose,  in  the  absence  of  evi- 
A  contract  is  dcncc  it  wiU  be  {)resumed  that  any  land  purchased 
brfor"proper  ^Y  ^^  '^^'^^  acquircd  for  purposes  authorized  by  the 
purpose.  charter.  Even  if  a  corporation  is  forbidden  by 
its  charter  to  hold  or  take  a  title  to  real  estate,  a  conve}'- 
ance  of  land  to  it  is  not  void.  It  is  valid  until  vacated 
by  a  direct  proceeding  by  the  sovereign,  instituted  for  that 
purpose.* 

"  It  is  competent  for  a  national  bank  to  take  steps  for  the 
recovery  of  its  property  stolen  by  burglars,  and  to  agree  to 
Bank  may      takc  like  stcps  for  the  recovery  of  the  property  of 

make  agree-  .,.,.« 

ment  to         othcrs  deposited  with  it  for  safe-keeping,  and  stolen 

recover  a  de-       ,,i  .•  i  j.c  T^• 

posit  stolen,  at  the  Same  time ;  and  want  ot  proper  diligence, 
care,  and  skill  in  performing  such  an  undertaking  is  ground 
of  liability  to  respond  in  damages  for  failure.  But  the  evi- 
dence in  this  case  failed  to  establish  either  such  an  agreement, 
or  the  want  of  diligence  and  care,  and  the  jury  was  properly 
instructed  to  return  a  verdict  for  defendant."  ^ 

"  As  to  the  second  cause  of  action,  the  facts  stated  in  the 
complaint  seem  to  us  to  be  sufficient,  if  proven,  to  constitute 
a  legal  liability  on  the  part  of  defendant.  It  would  certainly 
be  competent  for  a  national  bank  to  take  measures  for  the  re- 
covery of  its  own  property  lost  in  the  Avay  described.  If  the 
loss,  as  in  the  present  case,  included  the  property  of  others, 
and  it  was  deemed  best,  having  reference  to  the  bank's  own 
interest,  that  these  measures  should  be  taken  by  the  bank 
alone  for  itself  and  all  concerned,  it  might  lawfully  undertake 
to  act  for  others  thus  jointly  concerned  with  itself,  as  well  as 
for  itself  alone ;  and  want  of  proper  diligence,  skill,  and  care 
in  the  performance  of  such  an  undertaking  would  be  ground 
of  liability  to  respond  in  damages  for  such  failure."  ^ 

"  Converse  v.  Norwich,  &c.  11.  11.  Co.,  33  Conn.  1G6-179. 

*  Mallet  V.  Simpson,  94  N.  C.  :57. 

*  Wylie  V.  Northampton  Bank,  119  U.  S.  361. 

140 


IMPLIED    POWERS.  §  50 

§  57.    3.    It  may  make  all  arrangements  necessary  to  the 
advantageous  settlement  of  claims,  by  or  against  the  company ; 
as,  for  example,  a  compromise  ^   or  release.     But   settling 
if   the  arrangement  involves  abandonment  of   the   ^''"'"^• 
bank's  claim,  it  must  be  necessitated  by  the  circumstances. 

§  58.    4.   It  may  run  into  debt  by  account  with  a  merchant, 
overdraw  at  another  bank,  and,  in  general,  make   Goods  on 
such  monetary  arrangements  as  an  individual  may.   "'^^^^' 

§  59.  5.  Any  bank  may  deal  in  Government  securities,  as 
we  have  seen.  (§  59.)  A  national  bank  cannot  loan  on  the 
securitv  of  its  oimi  stock, ^  but  State  banks  may,   ^^   , 

'  1  Stocks  and 

so  far  as  not  prohibited,^  buy  and  sell  and  loan  iwiuis._^ 
upon  their  own  stock.  In  this  country  the  general  ''  ^ 
rule  is,  that  any  bank  may  loan  on  the  security  of  the  stocks 
or  bonds  of  othei-  corporations,^  but  cannot  buy  and  sell  them,* 
except  to  save  a  debt,'^  or  in  order  to  deposit  them  under  a 
law  requiring  such  stocks  to  be  given  as  security  for  circu- 
lation, or   by  reason   of  other  express  authority.^     For   the 

1  §  57.  A  bank  may  take  stock  in  compromise  of  a  doubtful  debt  ow- 
ing the  bank.  First  National  Bank  of  Charlotte  v.  National  Exchange 
Bank,  51  How.  Pr.  3-20. 

1  §  59.  II.  §  35. 

2  Mass.  P.  S.  676,  allow  a  bank  to  loan  on  its  own  stock  to  an  amount 
not  beyond  one  half  the  paid  capital ;  but  it  must  not  purchase  its  stock, 
nor  hold  it  more  than  six  months  after  it  becomes  the  property  of  the 
bank  through  non-payment  of  the  loan. 

3  And  sell  tliem  if  necessary  to  save  the  debt.  Third  National  Bank 
of  Baltimore  i-.  Boyd,  44  Md.  47;  Talmage  v.  Pell,  3Seld.  328;  Dearborn 
V.  Union  National  Bank,  58  Me.  273  (1870). 

*  It  is  no  part  of  the  banking  business  to  engage  in  "  traffic  "  in  mer- 
chandise or  financial  securities,  nor  is  dealing  in  stocks  an  incident  of 
the  business  in  its  regular  course.  Sackett's  Harbor  Bank  r.  Lewis  Co. 
Bank,  11  Barb.  213;  Weckler  v.  First  National  Bank,  42  Md.  58;  Frank- 
lin Bank  of  Cincinnati  v.  Commercial  Bank,  36  Ohio  St.  350.     See  §  77. 

5  Union  National  Bank  v.  Hunt,  7  Mo.  App.  22 ;  Silver  Lake  Bank  v. 
North,  4  Johns.  Ch.  370;  First  National  Bank  of  Charlotte  v.  National 
Exchange  Bank,  51  How.  Pr.  Rep.  320. 

^  See,  as  to  stocks  required  for  circulation  basis,  INIass.  P.  S.  G80.  In 
absence  of  statutory  authority  one  corporation  cannot  hold  stock  of 
another.  Franklin  Bank  of  Cincinnati  v.  Commercial  Bank,  36  Oliio 
St.  350. 

141 


§  G2  BUSINESS   POWERS. 

consequence  of  dealing  in  stock  beyond  its  power,  see  Ultra 
vires,  §  I'l'l. 

§  60.  0.  To  save  a  debt,  a  bank  may  take  real  estate  or 
personal  property,  by  conveyance  or  purchase  at  foreclosure 
sale  of  a  mortgage  held  by  it  as  collateral,  or  other- 
wise, and  may  hold  such  property,  not  permanently, 
but  a  reasonable  time,  to  enable  it  to  realize  advantageous 
sale  of  it.  A  bank  may  even  engage  tem})orarily  in  a  business 
entirely  foreign,  in  order  to  save  its  claim,  and  in  short  may 
do  any  act  a  prudent  man  would  do  under  the  same  circum- 
stances for  that  purpose.     See  §  78. 

§  61.  7.  It  is  a  general  principle  that  a  corporation  may 
invest  surplus  capital,  that  it  is  unable  to  make  use  of  in  its 
Surplus  cap-  business,  in  outside  investments  ;  for  example,  a 
^*'''^"  bank  may  buy  ^  notes,  to  sell  them  at  a  profit,  with 

such  capital.  Any  property  which  it  cannot,  by  reason  of 
special  circumstances,  make  immediate  use  of  to  advantage, 
Idle  prop-  hi  its  proper  business,  may  be  let  or  transferred, 
erty.  j^  ferry  company  can  lease  one  of  its  steamers,^  a 

hotel  company  temporarily  let  a  part  of  its  building  for  offices, 
and  no  doubt  a  bank  may  rightfully  let  or  sell  on  the  same 
principle. 

§  62.  8.  A  bank,  unless  restricted,  can  alienate  ^  its  prop- 
erty, real  or  personal,  in  whole  or  part,  but  not  its  franchises, 
,  for  these  are  special  privileges  that  cannot  be  dele- 

Alienation  of  . 

property.        gatcd  uor  acquircd  by  any  other  method  than  that 
prescribed  by  statute,  or  by  special  act  of  the  legis- 
lature.    But  a  bank,  being  instituted  partly  for  the  benefit  of 

1  §  Gl.    See  Lazear  v.  National  Union  Bank  (Md.),  12  Leg.  News,  64. 

2  Brown  v.  Winnisirnmet  Co.,  11  Allen,  ;326. 

*  §  02.  Sharswood  in  8  Phil.  94.  Corporations  aggregate  have  at  com- 
mon law  an  incidental  right  to  alien  or  dispose  of  their  lands  and 
chattels,  nnless  specially  restrained  by  their  charters  or  by  statute.  Inde- 
pendent of  positive  law,  all  corporations  have  the  absolute  yus  (Hsponendi, 
neither  limited  as  to  objects,  nor  circumscribed  as  to  quantity.  Co.  Lit. 
44  a,  300  6;  1  Sid.  161,  note  at  the  end  of  the  case.  The  case  of  Sut- 
ton's Hospital,  10  Co.  30  6;  1  Kyd  on  Corp.  108;  Com.  Dig.  tit.  Fran- 
chise, F.  11,  18;  2  Kent,  Com.  280;  Mayor  of  Colchester  v.  Lowten,  1  Ves. 
&  B.  226,  237,  210,  241;  Binney's  case,  2  Bland,  Ch.  142. 
142 


IMPLIED   POWERS.  §  63 

its  stockholders,  cannot  give  away  its  property  unless  with 
the  consent  of  them  all. 

§  63.  9.  So  far  as  it  is  involved  in  receiving  deposits,  bor- 
rowing is  a  part  of  banking,  but  borrowing  stricto  sensu,  tak- 
ing a  loan  for  a  definite  time,  instead  of  one  payable 
on  demand  as  ordinary  deposits  are,  is  not  ^  a  part  "  °^^'"^* 
of  the  business  of  banking,  nor  a  necessary  incident  tlicreof, 
as  a  continuous  practice  ;  but  (like  every  other  corporation  in 
the  United  States)  a  bank  has  ^  an  inherent  right  to  borrow 
money  whenever  it  is  reasonably  necessary  in  the  proper 
conduct  of  its  business,  unless  specially  restricted.^  The 
privilege  is  the  child  of  necessity,  and  is  limited  by  the  same 
necessity  or  intrinsic  propriety  which  gives  it  birth.  The 
borrowing  must  be  incidental  to  the  legitimate  banking  busi- 
ness of  the  association,  otherwise  the  act  is  ultra  vires  ;  as  if 
the  money  is  obtained  for  speculation.'*  Aside  from  the  theory 
of  law,  as  no  one  but  the  bank  can  well  judge  whether  a  loan 
is  reasonably  necessary  or  not,  the  practical  fact  is  that  a 
bank  can  borrow  whenever  it  wishes  to,  and  if  the  money  is 
used  in  its  proper  business  no  fault  will  be  found,  and  even  if 
wrongly  applied  it  will  not  affect  the  validity  of  the  loan  as 
between  the  parties  ordinarily.     (See  Ultra  vires.^ 

For  express  statutory  provisions,  see  §  69. 

Whenever  a  bank  may  rightfully  borrow  on  time,  it  can 

^  §  63.  The  business  of  a  bank  is  to  lend,  not  borrow;  to  discount  the 
notes  of  others,  not  to  get  its  own  discounted.  A  bank  under  certain 
circumstances  may  be  a  temporary  borrower  on  time,  and  give  its  note  on 
time;  but  such  transaction  would  be  so  out  of  the  course  of  ordinary  and 
legitimate  banking  as  to  require  those  making  the  loan  to  see  to  it  that 
the  agent  acting  for  the  bank  had  special  authority  to  borrow  the  money. 
Adams  v.  Cook  Co.  National  Bank,  Blodgett,  J.,  quoted  Ball  on  National 
Banks,  54. 

2  City  Bank  of  Columbus  v.  Beach,  1  Blatchf.  C.  C.  425 ;  Bank  of  Au- 
gusta r.  Earle,  13  Pet.  519;  People  v.  Oakland  County  Bank,  1  Dougl. 
282;  Tombigbee  R.  R.  Co.  v.  Kneeland,  4  How.  U.  S.  16.  See  also  6  Mo. 
App.  333;  and  Donnell  v.  Lewis  Co.  Savings  Bank,  80  Mo.  165. 

3  See  §  70. 

*  Curtis  V.  Leavitt,  15  N.  Y.  9 ;  Barnes  v.  Ontario  Bank,  19  id.  152; 
Leavitt  v.  Yates,  4  Edw.  Ch.  134;  Safford  v.  Wyckoff,  4  Hill,  442;  Tal- 
man  v.  Rochester  City  Bank,  IS  Barb.  123. 

143 


§  05  BUSINESS   POWERS. 

give  its  negotiable  note  on  time,^  and  a  bank  may  secure  per- 
Nefrotiabie  sons  wlio  loan  it  money  by  deposit  or  on  time  by 
oiuh"'"'''''  a  mortgage  of  its  property,  (but  not  of  its  fran- 
Seciinty,  cliises,)  and  mav  establish "  an  investment  depart- 
e'*--  ment,  in  which  certificates  issued   for   loans   and 

deposits  are  secured  by  the  transfer  to  a  trustee  of  negotiable 
paper,  to  be  held  by  him  solely  for  the  benefit  of  depositors 
and  others  dealing  with  the  bank,  and  thereby  give  them 
precedence  over  its  general  creditors  not  so  secured.  Such 
a  power  is  a  mere  incident  of  the  right  to  receive  deposits, 
which  by  necessary  implication  gives  power  to  assign  and 
mortgage  negotiable  instruments  as  security  for  thcm,^  and 
to  do  all  other  acts  that  the  nature  of  such  business  involves, 
on  the  ])rinciplcs  of  prudent  commercial  conduct. 

§  04.  All  corporations  have  power  to  draw  checks  and 
Checks  and  indorse  them  and  any  other  negotiable  paper  prop- 
indorsenient.  ^^^y  comiug  to  tlicm,  as  wlicu  they  receive  a  pay- 
ment in  that  form. 

§  05.  10.  Neither  as  included  in  its  powers  nor  incidental 
to  them  is  it  a  part  of  a  bank's  business  to  lend  its  credit.^  If 
Lending  a  bank  could  lend  its  credit  as  well  as  its  money,  it 
Guaranty.  might,  if  it  rcccivcd  compensation  and  was  careful 
Acconimoda-  ^^  P^^^  ^^^  name  only  to  solid  paper,  make  a  great 
tion.  (leal  more  than  any  lawful  interest  on  its  money 

would  amount  to.     If  not  careful,  the  power  would  be  the 

6  Ward  V.  Johnson,  9.')  111.  215. 

^  §  65.  A  national  bank  cannot  lend  its  credit.  It  has  no  power  on  de- 
posit of  collateral  security  to  gu.arantee  the  obligation  of  the  person  mak- 
ing the  deposit.  Seligman  v.  Charlottesville  National  Bank,  3  Hughes, 
647.  The  counsel  argued  that  a  bank  could  borrow  money  to  aid  its  cus- 
tomers, but  the  court  said  that  lending  its  credit  was  another  thing,  and 
not  within  nor  incidental  to  any  of  the  specified  powers  of  the  bank.  It 
does,  upon  analysis,  seem  clear  that,  however  much  on  the  surface  of 
things  borrowing  to  lend  may  resemble  lending  credit,  there  is  a  substan- 
tial difference  in  just  the  points  that  make  lending  credit  objectionable. 
1st.  If  a  bank  lends  moniiv  obtained  on  credit  it  only  puts  the  money 
in  its  possession  at  risk  once,  while  by  lending  credit  it  may  put  the  same 
money  under  an  indefinite  number  of  risks.  2d.  By  lending  money  it 
can  only  make  interest  on  money,  and  not  on  breath  and  ink,  as  it  could 
by  lending  credit. 

144 


IMPLIED   POWERS.  §  65 

mother  of  panics,  and  if  no  compensation  was  received,  there 
is  the  additional  reason,  if  any  is  needed,  that  sucli  a  power 
is  in  derogation  of  the  rights  and  interests  of  stockholders 
and  at  all  events  could  only  be  exercised  with  the  consent 
of  all. 

Indeed,  lending  credit  is  the  exact  opposite  of  lending 
money,  which  is  the  real  business  of  a  bank,  for  while  the 
latter  creates  a  liability  in  favor  of  the  bank,  the  former  gives 
rise  to  a  liability  of  the  bank  to  another. 

It  is  uniformly  held,  therefore,  that  a  bank  cannot  be  an 
accommodation  indorser,^ —  although  if  it  transcends  its  power 
in  this  respect,  it  does  not  follow  the  contract  is   Accommo- 

^  dation 

void  (see  Ultra  vires')  as  to  third  parties  without  surety. 
notice,  though  it  will  be  totally  void  in  the  hands  of  one  having 
notice, — nor  be  surety  for  another  in  any  business  in  which  it 
has  no  interest  and  can  derive  no  profit ;  as,  for  example,  the 
guaranty  of  a  building  contract.^ 

But  a  warranty  of  goods  sold  by  the  bank,  or  an  indorse- 
ment or  guaranty  *  of   a  note  negotiated  by  it,  is   perfectly 
lawful ;  for,  beside   being  rendered  necessary  and   May  war- 
proper  by  the  usual  habit  of  business  and  by  the   and'^uar-^' 
nature  of  the  case,  such  transactions  are  not  open   T^*^^  *""  *"" 

'  -t^  dorse  nego- 

to  the  objections  above.  They  are  not  contracts  tiabie  paper, 
upon  air  ;  the  bank  receives  value  and  has  a  real  interest ; 
with  reasonable  care  the  chance  of  loss  is  small,  no  greater 
than  in  many  other  acts  necessary  in  carrying  on  its  business, 

-  Johnson  v.  Charlottesville  National  Bank,  3  Hughes,  657. 

8  "  If,  in  the  course  of  its  business,  the  bank  finds  it  necessary  to  in- 
dorse for  transfer,  or  otherwise  specially  guarantee  negotiable  commercial 
paper,  (People's  Bank  v.  National  Bank,  101  U.  S.  181,)  it  will  not  be 
claimed  that  the  guaranteeing  of  other  written  contracts  is  included  with- 
in any  of  its  powers,'general  or  special,  or  is  necessarily  incidental.  It  is 
no  part  of  the  business  of  a  bank,  nor  necessarily  incidental  to  it,  to 
guarantee  a  building  contract,  or  one  for  furnishing  building  materials; 
and  the  defendants  had  no  power  to  make  the  guaranty  which  is  the  sub- 
ject of  this  action."      Norton  v.  Bank,  01  N.  H.  592. 

*  People's  Bank  v.  National  Bank,  101  U.  S.  181.  A  bank  may 
transfer  paper  by  indorsement  waiving  demand  and  notice,  and  there 
is  no  reason  why  it  should  not  give  a  guarantee  a  less  onerous  obli- 
gation. 

VOL.  I.  10  145 


§  68  BUSINESS   POWERS, 

(no  sum  of  money  is  put  at  more  tlian  two  risks  ^  by  such 
transactions,)  and  even  if  loss  occurs  it  is  attributable  to  the 
carelessness  or  misfortune  of  the  bank  in  acquiring  the  sub- 
ject matter,  not  in  guaranteeing  it,  and  such  agreements  are 
not  dangerous  to  the  financial  health  of  the  community,  but 
beneficial  to  it. 

§  60.  11.  A  bank  can  pay  dividends  out  of  its  earnings 
Dividends.  (and  uot  out  of  anything  else),  or  it  may,  and,  if  so 
Surplus.  provided,  muat  keep  the  whole  or  a  part  of  its  profits 
for  a  surplus  fund.^ 

§  67.  12,  In  the  absence  of  express  provision,  a  bank  may 
decline  to  enter  upon,  or  discontinue  the  exercise  of,  any 
severable  part  of  its  franchises  or  business ;  for  example,  a 
bank  may  receive  special  deposits  or  not,  as  it  chooses,  or  act 
as  a  collecting  agent  or  not. 

But  continued  abandonment  of  its  entire  business,  or  ne- 
glect of  any  function  that  is  also  by  the  organic  law  a  duty, 
may  be  a  cause  of  forfeiture.     See  §§  68,  69,  and  722. 

§  68.  Restrictions.  —  Having  examined  what  a  bank  can 
do,  it  may  be  well  to  glance  briefly  at  the  law  from  the  oppo- 
site point  of  view,  and  note  what  a  bank  cannot  do.  When 
you  have  driven  a  nail,  it  is  a  good  thing  to  hammer  it  a  little 
on  the  under  side.  This  region  of  No  Power  is  traversed  by 
three  lines  in  different  directions. 

1.  The  restrictions  are  such  as  exist  at  common  law,  or 
are  express,  which  last  may  be  declaratory  of,  or  in  deroga- 
tion of,  the  common  law. 

2.  They  may  be  absolute,  or  such  as  place  the  acts  to  which 
they  relate  beyond  the  power  of  the  bank  for  any  purpose  or 
under  any  circumstances  ;   or  conditional,  allowing   the    act 

6  It  may  lend  the  money  received  for  the  goods  or  note,  one  risk;  and 
the  warranty  constitutes  another,  but,  with  care  in  acquiring  the  property 
or  note,  not  a  large  one ;  and  at  any  rate  the  total  risk  is  only  such  as  is 
necessarily  incident  to  business  transactions,  and  no  door  is  opened,  as  ia 
the  case  of  lending  credit,  to  the  indefinite  accumulation  of  risks  piled 
panic  high  on  a  narrow  foundation  of  cash  and  the  frail  ice  of  public 
credulity,  that  may  at  any  time  give  way,  and  the  whole  structure  be 
engulfed. 

1  §  66.  Bank  of  Utica  v.  City  of  Utica,  4  Paige,  399. 
146 


LIMITATIONS   IN   THE   ORGANIC   LAW.  §  69 

under  some  circumstances  or  for  special  purposes,  and  pro- 
hibiting it  under  or  for  others.  This  distinction  is  of  much 
weight  in  considering  the  law  of  ultra  vires. 

3.  Violation  of  any  restriction  may  or  may  not  cause  for- 
feiture, according  to  the  principles  set  forth  in  §  722  et  seq. 

§  69.  Express  Restrictions.  —  These  must  be  loolicd  for  in 
the  organic  law  of  each  bank.  Each  charter  may  differ  from 
every  other ;  but  to  indicate  the  nature  of  the  limitations  to 
be  expected,  we  will  enumerate  the  most  important  ones  found 
in  the  National  Banking  Law  and  in  the  statutes  of  Massa- 
chusetts, adding  a  few  words  about  restrictions  relating  to 
the  formalities  of  contracts. 

Place. 
(a)   Business  is  not  to  be  done  away  from  the  bank.^    (Mass. 
&  U.  S.) 

Time. 
(^)    Bank  not  to  begin  business  till  one  half  the  capital  is 
paid,  and   the   organization   certificate  is  made,  and,  in  the 
case  of  a  national  bank,  not  until  the  comptroller  issues  his 
authorization  certificate.^     (Mass.  &  U.  S.) 

Traffic. 

(c)   Not  to  engage  in  trade  or  commerce.^     (Mass.) 

Debts  and  Loans. 

(<^)  Not  to  go  into  debt  beyond  a  specified  limit.*  (Mass. 
&  U.  S.) 

(e)  Not  to  borrow  on  time,  except  from  the  State,  or  a 
Massachusetts  savings  bank,  or  in  the  way  of  deposit  by  an 
assignee  in  insolvency;^  and  where  the  bank  cannot  borrow 
on  time,  it  cannot  issue  time  paper.     (Mass.) 

^  §  69.  II.  §  8,  and  P.  S.  676,  no  loan  or  discount,  or  issuance  of  note, 
away  from  bank.     See  §  46. 

2  P.  S.  ^73;  II.  §§  8,  14. 

8  P.  S.  677.     See  above,  §  47. 

*  II.  §  36.  The  ]\Iass.  P.  S.  676,  limit  debts  due  to  or  from  bank  to 
twice  paid  capital,  not  including  deposits  or  debts  due  to  or  from  a  bank, 
or  from  the  United  States  or  the  State. 

5  P.  S.  677. 

147 


§  G9  BUSINESS   POWERS. 

(J)  Not  to  make  a  loan  or  discount,  except  it  is  to  be  paid 
on  demand,  and  every  loan  or  discount  otherwise  made  is 
expresdi/  void,  and  the  bank  forfeits  8500  for  each  offence.'^ 
(Mass.) 

(r/)  Not  to  allow  debts  due  to  itself  to  accumulate  beyond  a 
fixed  limit.''     (Mass.) 

(h)  Not  to  loan  on  security  of  its  own  stock  (Nat.),"  or  only 
to  a  limited  extent  (Mass.).^     (Mass.  &  U.  S.) 

(«)  Not  to  allow  one  person  or  company  to  be  lialjle  to  the 
bank  to  a  greater  amount  than  one  tenth  of  the  bank's  cap- 
ital.9     (U.S.) 

(j)  Not  to  loan  to  its  officers  beyond  a  certain  limit,  unless 
by  vote  of  stockholders.^^     (Mass.) 

(/c)  Not  to  loan  to  any  corporation  whose  financial  officer 
is  cashier  of  the  bank.^i     (Mass.) 

Real  Estate. 

(Z)  Not  to  take  real  estate  security  for  concurrent  or  future 
loans,  nor  hold  realtv  for  other  than  the  specified  purposes.^^ 
(U.  S.) 

(m)  Not  to  hold  more  real  estate  than  is  equivalent  to 
twelve  per  cent  of  its  capital,  except  what  it  receives  as  security 
for  or  in  payment  of  debts.^^     (Mass.) 

Interest. 

(?i)  Not  to  take  interest,  or  discount,  beyond  a  specific 
limit.i*    (U.S.) 

(o)  Not  to  pay  interest,  except  on  money  borrowed  of  the 
State,  or  of  a  Massachusetts  savings  bank,  or  an  assignee  in 
insolvency,  or  on  debts  due  another  bank,  or  a  town  or  city  of 
Massachusetts.^^ 

Circulation. 

(jo)  Not  to  pledge  its  circulation  nor  use  it  in  any  way  to 
increase  its  capital. ^*^    (U.  S.)  . 

0  P.  S.  078.  ■^  ir.  §  35. 

8  P.  S.  G76,  not  beyond  one  half  capital  paid  in. 

9  II.  §  20.  10  P.  S.  679.  "  lb.  12  II.  §  28. 
18  P.  S.  077.            "  IT.  §  30.               1^  P.  S.  077.  i«  II.  §  37. 

148 


LIMITATIONS   IN   THE   ORGANIC   LAW.  §  70 

(s)  Not  to  refuse  to  redeem  its  circulation,  under  penalty 
of  dissolution  and  forfeiture  of  the  bonds  it  has  deposited  with 
the  United  States.^"    (U.  S.) 

(t)    Not  to  pay  out  certain  bills.^^    (U.  S.) 

(w)  Not  to  issue  more  than  a  given  quantity  of  notes  of 
specified  denominations.^^    $100  penalty.     (Mass.) 

Capital. 

(u)  Not  to  withdraw  any  part  of  capital  by  dividends,  etc.''^ 
(U.  S.) 

Provisions  Relating  to  Form.^ 

§  70.  (t^)  When  a  statute  says  the  contracts  of  a  bank 
shall  be  signed  in  a  particular  way,  or  by  particular  officers, 
opinions  differ  whether  it  is  to  be  construed  as  Directory  or 
merely  declaring  that  a  contract  so  executed  will   ""P^rative. 

1'  II.  §§  46-50.  18  II.  §  39.  19  P.  S.  682.  20  n.  §  33. 

1  §  70.  Note  on  the  Use  of  the  Corporate  Seal  in  making  Cor- 
porate Contracts.  —  The  old  rule  of  law  was,  that  a  corporation  could 
do  no  act  save  by  a  deed  executed  under  its  corporate  seal.  But  this 
ancient  principle  has  of  late  years  been  done  away  with  by  the  compul- 
sion of  the  practical  necessities  of  business;  and  in  our  land  and  our 
time  corporations  without  number  transact  their  affairs  with  a  very  infre- 
quent use  of  this  once  indispensable  formality.  In  the  case  of  The  Bank 
of  Columbia  v.  Patterson's  Administrator,  7  Cranch,  299,  the  Supreme 
Court  of  the  United  States  first  absolutely  declared  that  the  old  rule  could 
no  longer  be  regarded  as  law,  and  the  same  has  been  since  consistently 
and  frequently  held,  in  cases  not  only  of  banks,  but  of  various  other  spe- 
cies of  corporations.  Fleckner  i?.  Bank  of  United  States,  8  Wheat.  338 ; 
Mechanics'  Bank  of  Alexandria  v.  Bank  of  Columbia,  5  id.  326 ;  Stam- 
ford Bank  v.  Benedict,  15  Conn.  437 ;  Ridgway  v.  Farmers'  Bank,  12 
Serg.  &  R.  256;  Fishmongers'  Company  v.  Robertson,  12  L.  J.  N.  s.  185; 
5  Man.  &  Gr.  286;  6  Scott,  N.  R.  56.  But  the  practical  effect  of  the  old 
rule  is  reduced  to  a  low  point  by  the  doctrine  that  the  class  of  corpora- 
tions which  are  creatures  of  a  statute,  whether  general  or  special,  are  not 
within  the  force  of  the  common  law  rule. 

Then,  too,  the  ancient  rule  simply  required  that,  when  the  corporation 
i^s-e// performed  an  act,  that  act  should  be  done  by  deed  and  with  the  seal. 
This  rule,  strictly  construed,  still  leaves  the  corporation  free  to  create 
agents  to  whom  it  may  delegate  power  to  act  for  it,  and  the  acts  of  such 
agents,  though  binding  the  corporation,  are  yet  not  primarily  the  acts 

149 


§  71  BUSINESS   POWERS. 

1)0  sufiicicntly  executed  beyond  cavil,  but  not  excluding  other 
methods,-  or  is  to  be  considered  as  indicating  the  only  valid 
way  in  which  the  corporation  can  execute  its  contracts.^ 

But  such  a  provision  is  held  not  to  affect  the  ordinary  con- 
tracts made  by  a  cashier  as  an  inherent  part  of  his  office,  for 
Do  not  af-  these  are  not  made  by  the  corporation  directly, 
feet  matters    and  great  inconvenience  would   follow  construing 

of  daily  rou-  ^  .    .  .■      t    -i 

tine  not  in-  sucli  a  provision  to  covcr  these  matters  oi  daily 
action'of  the    and  hourly  routine.'^     (See  Ultra  vires,  and  Infor- 

corporation.      ^^^,^y^^^^  g  722.) 

Common  La'w  Restrictions. 
A  BitiEF  Restatement  of  the  Negative  Side  of  §§  47-67. 

§  71.  (a)  A  bank  cannot  sell  or  mortgage  its  franchises. 
(If  it  does,  it  will  be  a  case  of  "  absolute  ultra  vires,''  for  no 
fact  can  obscure  such  a  transaction.) 

(Z*)  A  bank  cannot  give  away  its  property,  except  by  con- 
sent of  all  the  stockholders,  though  the  directors  can  release 

of  the  corporation,  and  so  need  not  be  performed  by  deed  nor  evidenced 
by  seal.  Such  are  the  two  favorite  methods  which  jurists  have  adopted 
for  annulling  without  breaking  an  ancient  and  time-honored  principle. 
Either  artifice  accomplishes  sufficiently  satisfactorily  the  desired  end. 
Though  to  make  the  former  apply  it  is  essential  tliat  there  should  be  a 
statutory  enactment,  which  is  not  wholly  silent  concerning  the  govern- 
ment or  appointment  of  officers  of  the  corporation;  and  the  latter  is 
available  only  when  the  deed  and  corporate  seal  appear  somewhere  in  the 
chain  of  proceedings.  For  the  corporation  nmst  act  somewhere  and  at 
some  time  in  creating  the  original  agency  and  making  the  primal  dele- 
gation, and  this  act  must  be  accompanied  by  the  common  law  formali- 
ties, since  it  cannot  receive  the  protection  of  the  agency  theory.  But  the 
simple  truth  is,  that  the  elastic  expansion  of  modern  business  has  irrevo- 
cably snapped  the  clumsy  and  useless  ligament  which  older  generations 
found  less  intolerable.  Judges,  in  evading  the  rigidity  of  an  antiquated 
dogma  of  the  law,  have  simply  yielded  to  that  pressure  of  invincible 
necessity  which  the  developments  in  the  conduct  and  systems  of  the  busi- 
ness world  are  every  day  bringing  to  bear  upon  old-world  legal  technicali- 
ties. It  would  only  drag  the  law  into  contempt  to  declare  that  it  requires 
every  check  or  draft,  every  loan  or  discount,  every  indorsement  or  trans- 
fer, made  by  a  bank,  to  be  evidenced  by  a  corporate  deed  and  seal 

2  Barnes  i;.  Ontario  Bank,  19  N.  Y.  15. 

8  See  Safford  v.  Wyckoff,  4  Hill,  442. 
150 


RESTRICTIONS   AT   COMMON    LAW.  §  71 

a  claim  as  part  of  an  arrangement  the  whole  of  which  is  for 
the  advantage  of  the  bank  under  the  circumstances. 

((?)    Nor  traffic  in  merchandise,  stocks,  or  securities. 

{d)  Nor  act  as  agent  in  dealing  in  them,  except  as  stated 
in  §  59. 

(e)  Nor  be  an  accommodation  indorser  (except,  perhaps, 
by  consent  of  all  the  stockholders). 

(/)  Nor  be  a  surety,  except  so  far  as  is  necessarily  inci- 
dental to  its  business. 

(^)    Nor  lend  its  credit  in  any  way. 

(7t)  Nor  "  purchase "  negotiable  paper,  in  the  sense  of 
taking  it  free  from  the  taint  of  usury. 

(i)  Nor  issue  notes  to  circulate  as  money  without  special 
authority. 

(y)    Nor  borrow  on  time,  except  for  banking  necessities. 

(^)  Nor  engage  in  any  foreign  business,  except  so  far  as 
necessary  to  keep  surplus  capital  employed,  or  to  save  a  debt. 

(Z)  Nor  declare  dividends  out  of  its  capital.  Nor  assess 
shares,  unless  authorized  by  law,  or  by  express  agreement  of 
the  shareholders.^  There  is  no  inherent  power  to  call  on  the 
stockholders  for  more  funds  to  aid  the  bank's  business,  after 
they  have  paid  the  amount  of  their  stock.  But  if  authorized, 
the  bank  may  issue  new  shares,  giving  the  existing  stock- 
holders the  preference. 

1  §  71.  Tippets  V.  Walker,  4  Mass.  595;  Knowles  v.  Beatty,  1  McLean, 
41;  Palmer  v.  Ridge  Mining  Co.,  34  Pa.  St.  288. 

161 


CHAPTER  VII. 

Expansions  of  the  Powers  of  a  Bank  in  reference  to 
Purchase  of  Negotiable  Paper,  Handling  Stocks,  Deal- 
ing IN  Real  Estate,  and  Saving  Debts. 

§  71  A.   Analysis. 

§  72.  Power  of  Purchase.    §§  49,  722. 

Cases  affirming  power  to  purchase,  i.  e.  to  acquire  absolute  title ; 
title  otherwise  than  by  loan. 
(a)  Massachusetts, 
(t)   South  Carolina, 
(c)  Ohio, 
(f/)  Kansas, 
(c)  New  York 
(/)  Illinois. 
§  73.  Cases  denying  such  Power.    §§  49,  722. 
(a)  Minnesota. 

(6)   Maryland.     Lazcar  Brothers'  case,  and  dissent, 
(c)   Cases  in  form  denying  tlie  power  of  purchase,  but  using  the  word 
only  in  the  sense  of  power  to  buy  at  any  agreed  price,  without 
reference  to  usury  laws,  which  is  all  tliey  really  deny. 
§  74.   Real  Estate.     §  12,  n.  4,  §§  54,  109,  747  ;  II.  §§  28,  128. 
May  hold  realty  enough  for  its  business. 
May  buy  in  outstanding  title  of  land  mortgaged  to  it. 
Power  to  sell  implied  from  power  to  buy. 
Power  liberally  construed. 

May  buy,  build  on,  and  sell  lots  adjoining  the  bank  as  a  precau- 
tion against  fire. 
(6)  Ultra  vires  purchase, — only  sovereign  can  object.     §§  75  (c),  750. 
(c)  Previous  debts  in  New  York  mean  concurrent  debts. 
§  75.  National  bank  powers  in  respect  to  real  estate. 

Trust  deed  for  concurrent  loan  or  future  advances  probably 

good  (the  bank  being  the  restui),  though  a  mortgage  would 

(b)       be  bad,  because  it  gives  title,  and  therefore  violates  R.  S. 

§  5137.    See  Union  National  Bank  v.  Matthews,  U.  S.  S.  C. 
((/)  Loan  on  personal  security  is  good,  although  a  mortgage  is  also 
taken, 
(e)  The  note  may  be  concurrent  if  the  debt  was  previous. 
(/)  Trust  deed  to  a  third  party  for  benefit  of  bank  held  good. 
§  76.  Bank  may  be  trustee  of  real  estate  at  common  law.     See  (/'),  but 

contra  (c). 
(a)  New  York  law. 

152 


PURCHASE   AND    DISCOUNT.  §  72 

§  77.    Stocks.     §§  59,  164 ;  II.  §  35. 

National  bank  cannot  buy  its  own  stock ;  no  title  passes.     §  59. 
A  bank  may  buy  to  save  debt. 

May  liold  other  stocks  as  collateral,  but  cannot  traffic  or  speculate 
in  them. 
(a)  National  Bank  cannot  sell  railroad  bonds  on  commission, 
{b)   But  may  take  to  save  debt. 
§  78.    Saving  Debts.     §§  60,  77  a,  b. 

May  carry  on  an  iron  mill  in  order  to  make  itself  good. 
May  buy  in  land  or  outstanding  title,  or  may  sell  its  claim  and  trans- 
fer the  note. 

§  72.  Affirmative  Cases  on  the  Power  of  Banks  to  purchase 
Negotiable  Paper,  and  whether  Discounting  covers  more  than 
lending  on  responsibility  of  the  transferrer.  See  Alvey's  dis- 
sent, §  73  h. 

(Mass.)  (a)  Dealing  in  checks  is  part  of  the  usual  business 
of  banking,  and  would  be  within  the  general  powers  of  a  bank 
without  special  mention.  But  11.  §  8,  in  the  clause  relating 
to  discounting  and  negotiating  promissory  notes  and  other 
evidences  of  debt,  gives  express  power  to  buy  the  checks  of 
individuals,  whether  payable  to  bearer  or  order.^ 

(S.  C.)  (5)  A  draft  drawn  by  a  seller  against  a  buyer  in 
favor  of  a  national  bank,  by  which  it  is  discounted  or  pur- 
chased with  the  bill  of  lading  attached,  ji?asses  title  to  the  goods 
and  draft  to  the  bank.  The  draft  is  a  bill  of  exchange,  and 
its  purchase  is  not  beyond  the  powers  conferred  by  Congress 
upon  national  banks.^ 

(Ohio.)  (c)  In  a  case  concerning  the  purchase  of  an  in- 
land draft  or  bill  of  exchange,  the  court  used  the  following 
comprehensive  language  :  "  It  seems  to  be  the  idea  of  coun- 
sel making  the  objection,  that  negotiable  paper,  perfect  and 
available  in  the  hands  of  the  holder,  is  not  the  subject  of 
purchase  by  a  national  bank  at  any  rate  of  discount.  This 
view  we  think  entirely  erroneous.      We  see  nothing  in  the  act 

^  §  72.   First  National  Bank  v.  Harris,  108  Mass.  514. 

2  Union  National  Bank  v.  Rowan,  23  S.  C.  339.  But  the  United  States 
cases  cited,  viz.  Union  National  Bank  v.  Mathews,  98  U.  S.  621,  and  Na- 
tional Bank  v.  Whitney,  103  U.  S.  99,  seem  only  to  support  the  proposi- 
tion, that,  whether  a  bank  has  power  to  buy  negotiable  paper  or  not,  only 
the  United  States  can  object. 

153 


§  72       EXPANSIONS  OF  THE  POWERS  OF  A  BANK. 

of  Congress^  nor  in  reason^  ivhy  a  horroiver  may  not  obtain  the 
discount  by  a  bank  of  the  existiny  notes  and  bills  of  others  of 
which  he  is  the  holder,  as  well  as  of  his  oivn  paper  made 
directly  to  the  bank.  It  is  true  that,  as  between  natural  per- 
sons, the  purchase  of  such  paper,  when  made  in  good  faith,  and 
not  as  a  disguise  for  a  loan,  is  not  subject  to  the  usury  laws  ; 
but  it  is  otherwise  as  to  a  bank.  In  the  business  of  banking, 
the  purcliasing  and  discounting  of  paper  is  only  '  a  mode  of 
loaning  money.'  "^ 

(Kansas.)  (cZ)  Purchase  may  be  by  discount.  In  the  case 
of  individuals  the  purchase  of  negotiable  paper,  when  in  good 
faith  and  not  a  disguise  for  a  loan,  is  not  the  subject  of  usury 
laws.  It  is  otherwise  as  to  a  bank ;  it  may  buy,  or  simply 
loan  money  to  the  owner,  holding  him  responsible  ;  in  either 
case,  it  must  not  gain  more  than  the  legal  interest  in 
advance.* 

(N.  Y.)  (e)  Statutory  authority  to  discount  includes  power 
to  buy  notes.^ 

To  buy  or  purchase  a  debt  is  always  in  commerce  termed 
to  discount  it.^ 

"  To  discount  includes  to  buy,  for  discounting  is  at  most 
but  another  name  for  buying  at  a  discount."  ^ 

(111.)  (/)  A  note  taken  in  the  usual  course  of  business 
may  be  deemed  to  have  been  "  discounted  "  (within  R.  S. 
5136)  though  the  term  "  purchase  "  might  apply  to  the  trans- 
action.' Purchase  may  be  made  by  discount  as  well  as 
"  loan,"  i.  e.  the  absolute  title  to  the  note  may  pass  to  the 
bank  ;  if  the  customer  assumes  any  responsibility,  it  is  a  loan  ; 
if  he  does  not,  it  is  an  advance  made  to  him  in  consideration 
of  the  transfer  without  recourse,  or  by  delivery  in  case  of 

8  Smith  V.  Exchange  Bank,  2G  Ohio  St.  141. 

*  Pope  V.  Capital  Bank  of  Topeka,  20  Kans.  440.  The  judge  quoted 
Bouvier's  definition  of  Discount:  "To  discount  signifies  the  act  of 
buying  a  bill  of  exchange  or  promissory  note  for  a  less  sum  than 
that  which  upon  its  face  is  payable."  The  word  means  simply  "cut- 
ting off." 

6  Atlantic  State  Bank  v.  Savery,  18  Hun,  36. 

6  Tracy  v.  Talmage,  18  Barb.  462. 

■^  First  National  Bank  v.  Sherburne,  14  111.  App.  566. 

154 


PURCHASE   AND   DISCOUNT.  §  73 

paper  payable  to  bearer.  If  the  bank  takes  more  than  the 
law  allows,  it  is  usury  in  one  case  as  in  the  other,  but  the 
word  "  purchase  "  properly  applies.' 

§  73.  Negative.  —  1st.  Cases  denying  that  a  bank  can  ac- 
quire valid  title  otherwise  than  by  loan,  under  the  power  to 
discount. 

{((')    In  Minnesota  1  it  is  said,  it  cannot  be  the  case  that 
"  the  power  to  purchase  and  traffic  in  promissory  notes  as  a 
species  of  personal  property  belongs  to  any  bank   ^^.^^^ 
as  a  necessary  incident  to  its  existence,  or  to  the   state  bank 

•'  ,  cannot  buy 

exercise  of  any  of  its  powers  as  a  bank  of  circu-   because  it 

,         ,  would  nul- 

lation  and  deposit  alone     ;  and,  "  havmg  no  corpo-    vdy  the 
rate  capacity  to  make  the  contract   of   purchase,   "''"'^^  *^^' 
the   plaintiff  never  acquired  any  title  to  the  note  in  suit,  and 
the  attempted  act  of  purchase  was  strictly  ultra  vires,  and 
conferred  no  rights  whatever." 

"  It  is  conceded  that  plaintiff's  only  title  to  the  note  in 
question  rests  upon  its  absolute  purchase,  as  a  chose  in  action, 
from  one  Patterson,  the  then  owner,  for  a  specific  sum  agreed 
upon  and  paid  at  the  time  of  the  purchase.  Patterson  did 
not  indorse  the  note,  nor  expressly  assume  any  obligation  in 
connection  with  the  transfer." 

"  Under  the  act  in  question,  the  business  of  banking  is 
authorized  to  be  carried  on  '  by  discounting  bills,  notes,  and 
other  evidences  of  debt,  and  by  loaning  money  on  real  and 
personal  security'  (sect.  13),  and  the  rate  of  interest  allowed 
to  be  charged  for  such  discounts  and  loans  is  limited  to  twelve 
per  cent  taken  in  advance  (sect.  33).  The  obvious  intent  of 
this  legislation  was  to  secure  to  the  public  business  loans  and 
accommodations  at  what  was  then  regarded  reasonable,  and 
not  exorbitant,  rates  of  interest ;  and  also  to  protect  the  share- 
holders of  banks,  and  the  banks  themselves,  against  the  risk 
of  loss  from  inadequate  securities,  such  as  would  likely  be 
taken  under  the  tempting  influences  of  high  rates  of  interest, 
regulated  only  by  the  necessities  of  borrowers,  and  the  cupid- 
ity of  bank  directors.  If,  however,  as  is  claimed  on  the  part 
of  plaintiff,  associations  organized  under  this  enactment  pos- 
1  Farmers  &  Mechanics'  Bank  v.  Baldwin,  23  Minn.  201,  204. 

155 


§  73       EXPANSIONS  OF  THE  POWERS  OF  A  BANK. 

sess  the  unlimited  power  of  dealing  in  promissory  notes  and 
other  evidences  of  debt,  as  property  and  choses  in  action,  the 
same  as  individuals,  then  obviously  this  restriction  upon 
the  rate  of  interest  is  a  practical  nullity  ;  as  the  bank  has 
the  power  to  evade  it  at  any  time  by  simj^ly  buying  the  paper 
instead  of  loaning  money  u})on  it." 

It  has  also  been  said,^  generally,  that  purchasing  or  traf- 
ficking in  promissory  notes  is  not  a  legitimate  part  of  the 
National  banking  business,  properly  so  called,  and  that  a 
buyVealllia-    '^'^"'^    holding   a   note   by    i)urchasc   has   no    title 

ble  paper.  tllCrcto. 

"  The  word  '  negotiating '  as  used  in  this  section,  likewise  in 
sect.  29  of  the  same  statute  (U.  S.  Rev.  Stat.,  sect.  5136),  is 
used  in  the  ordinary  and  appropriate  transitive  sense,  to  indi- 
cate, not  an  act  of  purchase,  but  one  of  transfer,  whereby  the 
negotiated  paper  is  passed  from  the  holder  or  owner,  and  put 
into  circulation. 

"  In  the  absence  of  any  authoritative  exposition  of  the  Fed- 
eral statute  in  this  regard,  the  princijde  settled  in  the  Farm- 
ers and  Mechanics'  Bank  v.  Baldwin  must  be  regarded  as 
decisive  of  the  present  case." 

"  A  borrower  may,  as  was  held  in  Smith  v.  Exchange 
Bank  of  Pittsburg  (3  Central  Law  Jour.  623),  cited  by  appel- 
lant, obtain  the  discount  by  a  bank  of  the  existing  notes 
and  bills  of  others,  of  which  he  is  the  holder,  as  well  as  of 
his  own  paper  made  directly  to  the  bank,  and  the  bank  will 
thereby  acquire  a  valid  title  to  such  paper,  because  it  makes 
the  purchase  by  discount,  or  through  the  exercise  of  its  dis- 
counting powers.  But  where  the  acts  of  the  parties  and 
the  circumstances  surrounding  the  transaction  clearly  rebut 
any  presumption  arising  from  the  indorsement,  —  and  indis- 
putably the  real  nature  of  the  transaction  intended  by  the 
parties  to  be,  in  the  language  of  the  court  below,  '  an  out  and 
out  purchase  of  the  note,  and  not  discounting  it,  or  lending 
money  on  the  credit  of  it,'  —  the  mere  fact  of  indorsement  is 
not  sufficient  to  warrant  the  court  in  treating  the  transaction 
as  something  different  from  what  was  intended." 

2  First  National  Bank  of  Rochester  v.  Pierson,  24  Minn.  141,  142. 
156 


PURCHASE   AND   DISCOUNT.  §  73 

These  Minnesota  cases  do  not  seem  to  contemplate  the 
alternative  of  holding  that  a  bank  may  acquire  title  by  pur- 
chase as  distinguished  from  loan,  and  yet  that  its  power  of 
purchasing,  as  well  as  its  power  of  lending,  must  be  exercised 
within  the  limits  its  organic  law  prescribes. 

The  last  case  is  overruled  in  33  Minnesota  as  to  the  point 
that  a  National  Bank  may  recover  on  a  note  taken   Last  case 

,  .    ,  .  overruled  on 

ultra  vires  (which  see).  one  point. 

(6)  Though  a  national  bank  may  invest  its  surplus  capi- 
tal in  notes  (but  not  its  mere  daily  surplus),  it  can- 
not buy  or  acquire  title  otherwise  than   by  loan ;        " 
and  if  it  does,  it  cannot  recover  on  such  notes.^    Alvcy,  J., 
Bartol,  C.  J.,  and  Irving,  J.  dissenting.      As  this  was  a  very 
strongly  argued  case,  we  give  it  at  some  length. 

Majority  opinion :  "  The  evidence  shows  that  Winchester 
and  Son,  note  and  bill  brokers,  were  employed  by  Lazear 
Brothers  to  sell  the  note  of  July  22,  1872,  to  any  purchasers 
willing  to  buy,  and  that  it  was  sold  to  the  appellee,  over  the 
counter  of  its  banking-house,  at  nine  per  cent  discount,  for  La- 
zear Brothers,  the  drawers,  who  received  the  proceeds  of  sale. 
None  of  the  bank  officers  were  informed  that  the  Winchesters 
were  acting  for  Lazear  Brothers,  nor  were  the  latter  told  to 
whom  the  note  had  been  sold.  The  note  was  sold  to  the 
bank  on  the  8th  day  of  July,  1872.  The  president  of  the 
bank  testified  that  the  note  in  question  was  purchased  by 
order  of  the  board  of  directors,  and  that  he  had  an  impres- 
sion, he  believed,  that  Lazear  Brothers  were  to  get  the  proceeds 
of  it.  He  further  proved  that,  after  the  customers  of  the 
bank  were  served,  it  sometimes  invested  its  surplus  proceeds 
in  notes.  We  are  of  opinion  that  this  transaction  was  an  out 
and  out  purchase  by  the  bank,  and  that  such  purchase  was 
without  authority,  and  that  the  bank  acquired  no  title  to  the 
note,  and  cannot  recover  thereon  in  this  suit.  While  we  do 
not  mean  that  a  national  hank  may  not  invest  its  siirplus  capi- 
tal in  notes,  we  are  of  opinion  that  it  has  no  authority  to  use 
such  surplus  funds,  as  may  remain  on  hand  from  day  to  day, 
for  the  purpose  of  buying  notes.  National  Bank  of  Roches- 
3  Lazear  Brothers'  v.  National  Union  Bank,  62  ]\Id.  124. 

157 


§  73  EXPANSIONS   OF   THE   POWERS   OF   A    BANK. 

ter  V.  Pearson,  Thompson's  Bank  Cases,  637  ;  Farmers  and 
Mechanics'  Bank  v.  Baldwin,  23  Minn.  198.  If  any  other 
construction  were  given  to  such  a  transaction  as  this,  the  in- 
tention of  Congress  to  prohibit  national  banks  from  buying 
and  selling  notes  would  be  entirely  defeated,  and  those  insti- 
tutions would  be  at  perfect  liberty  to  decline  making  discounts 
for  their  customers,  and  afterwards  to  buy  up  the  very  paper 
which  had  been  offered  for  discount  and  refused,  at  such  price 
as  the  bank  might  choose  to  give.  The  note  of  the  22d  of 
June,  1872,  for  five  thousand  dollars,  was  acquired  by  the  ap- 
pellee by  purchase,  without  authority  to  make  such  purchase, 
and  it  is  not,  therefore,  entitled  to  the  note,  and  cannot 
recover  upon  it." 

Dissent  by  Alvey,  J. :  "  If  Lazear  Brothers  had  presented  the 
paper  in  person,  and  obtained  the  money  upon  the  terms  upon 
which  the  brokers  obtained  it,  there  would  then  have  been  no 
question  as  to  the  legality  of  the  title  acquired  by  the  bank  ; 
that,  it  is  conceded,  would  have  been  a  discount.  But  it  is 
contended,  and  it  is  so  held  in  the  opinion  of  the  majority  of 
this  court,  tliat,  as  the  note  was  obtained  from  Winchester  and 
Son,  bill  brokers,  without  disclosure  at  the  time  from  them 
that  the  money  was  for  the  benefit  of  the  makers  of  the  note, 
therefore  it  was  a  purchase  of  the  note  as  contradistinguished 
from  a  discount,  and  that  the  transaction  was  ultra  vires,  and 
consequently  no  title  to  the  note  was  transferred  to  the  bank. 
To  this  proposition  I  cannot  assent. 

"Now,  without  invoking  the  aid  of  any  implied  power  pos- 
sessed by  the  bank  to  enable  it  to  carry  on  the  banking  busi- 
ness, it  is  expressly  authorized,  as  we  have  seen,  to  discount 
and  negotiate  promissory  notes.  What,  then,  is  the  meaning 
of  the  word  '  negotiate,'  according  to  its  ordinary  acceptation 
among  business  men  ?  According  to  the  most  approved  lexi- 
cographers, its  meaning  is  '  to  transfer,  to  sell,  to  pass,  to 
procure  hy  mutual  intercourse  and  agreement  ivith  another, 
to  arrange  for,  to  settle  by  dealing  and  management.'  Web- 
ster's and  Worcester's  Diet.  This  term  would  seem  to  be 
comprehensive  enough  for  all  the  requirements  of  the  case ; 
but,  by  allowing  the  full  meaning  to  the  more  exact  and  im- 
158 


PURCHASE   AND    DISCOUNT.  §  73 

portant  term,  '  discount,'  all  doubt  whatever  would  seem  to 
be  removed.  To  discount  is  to  deduct  a  sum  of  money 
from  the  debt  in  consideration  of  its  bcin<^  paid  before  the 
usual  or  stipulated  time  for  payment.  In  the  case  of  Fleck- 
ner  v.  Bank  of  United  States,  8  Wheat.  350,  Judge  Story,  in 
delivering  the  opinion  of  the  court,  having  occasion  to  define 
a  discount  by  the  bank  said  :  '  Nothing  can  be  clearer  than 
that,  by  the  language  of  the  commercial  world,  and  the  settled 
practice  of  banks,  a  discount  by  a  bank  means,  ex  vi  termini, 
a  deduction  or  drawback  made  upon  its  advances  or  loans 
of  money,  upon  negotiable  paper,  or  other  evidences  of 
debt,  payable  at  a  future  day,  which  are  transferred  to  the 
bank.' 

"  Purchase  may  be  by  way  of  discount,  equally  as  a  loan 
may  be  made  by  that  means.  When  the  party  receiving  the 
proceeds  of  the  paper  discounted  is  himself  either  maker  or 
indorser,  and  the  discount  is  made  on  his  responsibility,  he 
receives  the  money  as  a  loan,  for  he  is  bound  to  return  it ; 
but  if  he  is  in  no  ivay  bound  on  the  paper,  he  receives  the 
money  as  an  advance,  and  as  a  consideration  for  the  transfer  of 
the  paper.  Both  transactions  are,  according  to  the  established 
practice  and  usage  of  banks,  discounts,  though  the  latter  is  in 
effect  a  purchase  by  the  bank.  The  act  of  discounting  sim- 
ply has  reference  to  the  deduction  from  the  face  amount  of 
the  paper  for  the  time  it  has  to  run  to  maturity,  and  the  rate 
of  that  deduction ;  but  whether  the  transaction  amounts  to  a 
loan  or  a  purchase  on  the  part  of  the  bank,  depends  upon 
other  facts  and  condition  of  things, 

"  Suppose  the  payee  of  a  promissory  note  payable  to  order 
takes  it  to  a  bank,  and  procures  the  money  on  it,  less  the  rate 
of  discount,  upon  indorsement  without  recourse  ;  would  not 
that  be  strictly  a  discount  within  the  meaning  of  the  law,  not- 
withstanding it  would  not  be  a  loan  upon  the  responsibility  of 
the  party  obtaining  the  money  ?  Such  a  transaction  would 
not  be  a  loan  at  all,  acccording  to  the  correct  meaning  of  the 
term  ;  and  yet  if  it  be  a  discount,  according  to  the  modes  and 
usages  of  banking,  why  should  not  any  third  party  holding 
paper  payable  to  bearer,  or  indorsed  in  blank,  be  able  to  nego- 

159 


§  73       EXPANSIONS  OF  THE  POWERS  OF  A  BANK. 

tiatc  that  paper  with  the  bank,  by  way  of  discount,  and  trans- 
fer a  fii;ood  title  to  the  bank,  notwithstanding  his  name  might 
not  appear  upon  the  paper,  or  he  incur  any  liability  in  respect 
to  it.  I  cannot,  I  must  confess,  perceive  the  reason  for  the 
distinction  that  has  been  made  in  this  case.  It  should  be  rec- 
ollected that  it  is  not  the  rate  of  discount  with  reference  to 
which  the  parties  deal,  that  determines  the  question  of  the 
A'alidity  of  the  transfer  of  the  paper,  or  the  title  of  the  bank, 
though  the  latter  may  have  exacted  and  received  more  than 
the  lawful  rate  of  discount.  All  the  business  of  the  national 
banks  is  done  under  the  restrictions  prescribed  by  the  act  of 
Congress ;  and  the  rate  of  discount  is  expressly  prescribed 
among  the  various  regulations  contained  in  the  act  for  the 
government  of  the  banking  business ;  and  for  taking,  receiv- 
ing, or  charging  any  greater  rate  of  interest  or  discount  than 
is  by  the  act  allowed,  the  bank  subjects  itself  to  the  penalties 
prescribed  by  sect.  5198  of  the  Revised  Statutes ;  but  the  title 
to  the  paper  is  not  thereby  affected." 

2d.  Cases  which  deny  the  power  of  purchase  of  negotiable 
paper,  but  use  the  word  merely  to  exclude  transactions  not 
controlled  by  usury  laws,  and  do  not  mean  that  a  bank  can- 
not acquire  title  to  negotiable  paper  absolutely  by  indorsement 
without  recourse. 

(e.)  The  banking  law  of  New  York  authorized  banks  to 
"  carry  on  the  business  of  banking  by  discounting  bills,  notes. 
Miscellaneous  ^^^^  othcr  evidences  of  debt,  ...  by  buying  and 
•l^.ff-  ,         selling  .  .  .  bills  of  exchange,"  &c.     It  has  been 

All  bank  '^  o   ' 

transactions    held,  that  this  did  uot  authorizo  a  bank  to  purchase 

are  siihject  to  .  .     .         ,         ,  ,         . 

usury  laws,  a  bill  or  notc.     The  distinction  became  essential  in 

discounts  to  Connection  with  the  point  of  usury.      If   the  bank 

fact^^Uiough  could  Only  discount  bills  and    notes,  it  could   not 

the  same  cvadc   the   statutcs    controlling   usury.     But   if   it 

transaction  "  •' 

between  in-     could  huu  biUs  and  notes,  it  could  buy  them  at  any 

dividuals  .  ,  f  ,  .    ,  ,  •  ,       i  n 

would  be  price  which  might  be  agreed  upon  with  the  seller, 
chase,  amr  and  SO  practically  cvadc  thc  Statute.  The  question 
the^tafnt'^or  thci'efore  was,  which  character,  that  of  discount  or 
"su'v.  that  of  purchase,  should  be  given  to  a  completed 

transaction.     The  court  gave  to  it  the  character  of  a  discount, 
160 


PURCHASE   AND    DISCOUNT.  §  74 

on  the  ground,  that  the  bank  could  discount,  but  could  not 
buy,  mercantile  paper  ;  and  the  taint  of  usury  was  therefore 
held  to  inhere  A 

Power  to  discount  notes  is  not  power  to  purchase  them. 
The  right  of  purchasing  is  an  entirely  distinct  and  indepen- 
dent one,  which  may  or  may  not  be  enjoyed  by  any  bank,  ac- 
cording to  the  circumstances  of  its  particular  case  and  the 
language  of  its  incorporating  act.  If  {possessed,  it  is  simply  a 
right  to  buy  the  notes  in  the  market  for  their  fair  market 
value,  whatever  that  may  be.  It  must  be  a  bona  fide  transac- 
tion of  bargain  and  sale.  If  it  be  colorable  only,  and  resorted 
to  for  the  purpose  of  covering  up  a  usurious  dealing,  it  will 
be  treated  as  a  usurious  contract.^ 

§  74.    Powers  in  Relation  to  Real  Estate.  —  Ordinarily,  it  is 
no  part  of  the  banking  business  to  hold  or  deal  in  real  estate. 
No  general  right  to  do  so  can  be  considered  to  be   ^^^j^^  ^^^ 
inherent  in  a  bank.     Certain  obvious  cases,  how-   its  own  place 

...  ,  of  bus^iiiess 

ever,  m  which  it  is  emmently  proper,  almost  even  or  to  secure 
necessary,  that  a  bank  should  be  able  to  acquire,  to 
hold,  and  to  sell  land  and  interests  in  land,  will  suggest  them- 
selves at  once  to  every  mind.  Thus  it  may  often,  especially 
in  small  towns,  be  impossible  to  obtain  a  building  with  the 
suitable  appliances  for  security,  unless  the  corporation  can  buy 
land  and  erect  a  structure  for  itself.  The  mortgage  or  con- 
veyance of  real  estate  to  it  may  often  be  the  only  means  by 
which  debts  owing  to  it  can  be  secured  or  discharged.  If  a 
bank  should  come  into  possession  of  land  in  perfect  good 
faith  for  either  of  these  purposes,  and  should  hold  it  or  sell 
it  only  in  due  and  bona  fide  prosecution  of  these  objects,  it 
seems  unreasonable  to  imagine  that  the  most  rigorous  court 
of  justice  would  declare  the  transaction  illegal.  But  the 
necessity  of  discussing  the  question  of  the  abstract  legality  of 

*  Niagara  County  Bank  v.  Baker,  15  Ohio  St.  68,  upon  authority  of 
the  cases  cited  in  the  next  note. 

^  See  Fleckner  v.  Bank  of  the  United  States,  8  Wheat.  338;  Talmage 
V.  Pell,  3  Seld.  328;  Dunkle  v.  llennick,  6  Ohio  St.  534;  McLean  r. 
Lafayette  Bank,  3  McLean,  587;  Philadelphia  Loan  Co.  v.  Towner,  13 
Conn.  259. 

VOL.  I.  11  161 


§  74       EXPANSIONS  OF  THE  POWERS  OF  A  BANK. 

such  proceedings  has  nearly  always  been  saved  by  the  inser- 
_     „    ,       tion  in  charters  and  organic  laws  of  clauses  specifi- 

Usuallv  the  ,  •         ,     i  i  i         i,  , 

ortjanir  law  cally  enabling  banks  to  acquire,  hold,  and  sell  real 
Pow^'e'r  to  sell  ©statc  for  thcsc  purposcs.^  The  legislative  expres- 
inipiicii  from   gi^,^  Qf  ^]^\^  power  of  coursc  cxcludcs  its  exercise 

power  to  pur-  * 

chase.  otherwise  than  in  ])rccise  accordance  with  the  statu- 

Jutstandiilg  tory  j)rovisions.  The  holding,  acquiring,  or  selling 
*'"^-  to  any  greater  extent,  in  any  other  manner,  or  for 

T*t)WGr  libcF" 

ally  con-  any  other  end,  than  is  therein  set  forth,  would  be 
strued.  unquestionably  illegal.^   The  power  to  purchase  land, 

or  to  take  it  in  mortgage  or  by  absolute  conveyance,  without 
the  additional  expression  of  the  power  to  sell  it  or  to  assign  the 
mortgage,  will  by  necessary  implication  confer  those  powers 
also,  and  even,  it  has  been  held,  the  power  to  mortgage  it.^ 
Further,  it  must  be  regarded  as  appurtenant  to,  or  even  a  part 
of,  the  power  to  take  land  in  mortgage  or  pledge,  that  the 
bank  should  also  be  permitted  to  deal  in  reference  to  the  land 
or  interest  therein,  thus  acquired,  in  any  manner;  as,  for  ex- 
ample, by  buying  in  any  outstanding  title  or  interest,  or  in 
any  other  way  whatever,  that  may  prove  desirable  for  render- 
ing the  security  more  perfect  or  more  available.^  The  courts 
seem  generally  to  have  been  inclined  to  construe  the  privileges 
of  this  nature  conferred  upon  banks  in  a  very  liberal  way. 
The  foregoing  cases  and  instances  certainly  do  not  appear  to 
trespass  beyond  strict  justice ;  but  others  can  be  added  where 
the  bounds  of  reasonable  construction  have  been  much  more 
freely  extended. 

(a)  Thus,  a  bank  authorized  to  hold  as  much  real  property 
-,     ,  as  miffht  be  necessary  for  its  immediate  accommoda- 

Mav  buy,  «  •' 

build  on,  and  tjon  was  held  to  have  the  right  to  buy  up  the  land 

sell  land  ad-  . 

joining  the  in  tlic  neighb(n-hood  of  its  banking-house,  to  erect 
precaution  firc-proof  buildiugs  thereon,  and  then  to  sell  these 
against  fire.    ^^^^  again;   the  end  being,  of  coursc,  the  greater 

§  74.    Thomaston  Bank  v.  Stimpson,  21  Me.  195. 
2  Metropolitan  Bank  v.  Godfrey,  23  111.  579. 

8  Jackson  v.  Brown,  5  Wend.  590;  Curtis  v.  Swartwout,  1  N.  Y.  Leg. 
Obs.  406. 

*  Ingraham  v.  Speed,  3  Miss.  410. 
1G2 


TAKING  LAND  FOR  "  PREVIOUS  DEBTS."        §  74 

security  of  its  own  building.^  The  case  of  Baird  v.  Bank 
of  Washington^  contains  a  long  and  interesting  dissertation 
upon  the  rights  which  were  conferred  upon  the  bank  by  a 
clause  in  the  act  of  incorporation,  allowing  it  to  hold  "  such 
lands  as  were  bona  fide  mortgaged  or  conveyed  to  it,  in  sat- 
isfaction of  debts  previously  contracted  in  the  course  of  its 
dealings."  The  reasoning  and  language  of  the  court  will  ap- 
ply to  a  great  number  of  similar  clauses  in  other  incorpo- 
rating acts,  in  which  language  essentially  identical  with  this 
is  of  frequent  occurrence.  It  was  declared  that  the  right  to 
commute  debts  for  lands  was  general,  and  was  not  limited  to 
cases  where  any  doubt  existed  as  to  the  perfect  safety  of  the 
debt.  The  effect  of  the  words  employed  was  simply  to  pro- 
hibit colorable  commutation,  whereby  a  real  purchase  might 
be  effected  under  a  technical  disguise.  Provided  the  debt  was 
pre-existing,  and  was  a  bona  fide  one,  that  is  to  say,  not  con- 
tracted originally  with  the  purpose  of  being  discharged  by  the 
conveyance  of  real  estate,  the  conveyance  would  be  strictly 
valid ;  although,  without  it,  the  safety  of  the  debt  must  be 
unquestionable.  The  court  also  added,  as  a  semble,  that  if  the 
conveyance  were  made  to  trustees  for  the  bank,  with  the  intent 
to  raise  money  by  selling  it,  and  not  with  a  view  to  holding  it 
permanently,  neither  the  letter  nor  the  spirit  of  the  statute 
would  be  violated. 

(6)  Further,  the  opinion  was  expressed,  on  the  strength  of 
the  decision  in  Leazure  v.  Hillegas,"  that,  even  if  the  bank 
should  take  from  a  debtor  real  estate,  which  it  had   ^  ,    , 

'  Onlv  the 

no  right  to  hold,  the  title  of  the  bank  therein  sovereign 
would  be  defeasible  only  at  the  instance  of  the  '^^^  °  ^^^ ' 
State ;  that,  if  the  title  should  be  set  aside  in  a  process  thus 
instituted,  the  land  would  not  revert  to  the  party  granting  to 
the  bank,  but  would,  apparently,  fall  in  to  the  State  itself ; 
yet  that  the  debtor  would  have  been  fully  acquitted  and  dis- 
charged from  his  indebtedness,  and  the  loss  would  have  to  be 
borne  wholly  by  the  bank.  This  view,  though  properly  only 
an  obiter  dictum,  was  expressed  with  a  good  deal  of  confidence, 

6  Banks  v.  Poitiaux,  3  Rand.  136.  «  11  Serg.  &  R.  411. 

">  7  Serg.  &  R.  313. 

163 


§  75  EXPANSIONS   OF  THE   POWERS   OF   A   BANK. 

and  apparently  upon  a  mature  consideration  of  the  whole  sub- 
ject.    It  is  certainly  difficult  to  see  why  it  is  not  sound. 

(e')  Where,  by  its  charter,  a  bank  was  authorized  to  take 
mortgages  in  security  for  debts  previously  contracted,  it  was 
N.  Y.  adjudged  by  Chancellor  Kent,  that,  if  the  loan  and 

hllk^"^^  mortgage  were  concurrent  acts,  and  intended  so  to 
North.  ]jQ^  If  ^i,(^g  ^q(  (j  ^.^gg  within  the  reason  and  spirit  of 

the  restraining  clause  of  the  statute,  which  only  meant  to  pro- 
hibit the  banking  company  from  investing  their  capital  in  real 
property  and  engaging  in  land  speculations.  "  A  mortgage 
taken  to  secure  a  loan,  advanced  bona  fide  as  a  loan,  in  the 
course,  and  according  to  the  usage,  of  banking  operations, 
was  not,  surely,"  says  he,  "  within  the  prohibition."  ^ 

A  similar  decision  has  been  made  in  Virginia,^  the  court 
quoting  Kent  in  the  Silver  Lake  case :  "  Previously  contracted  ? 
how  long  previously  ?  must  it  be  a  month,  a  week,  a  day,  or  a 
minute?"  Of  course,  this  is  mere  jugglery  with  words.  If  the 
legislators  said  "  previously,"  they  did  not  mean  concurrent, 
and  no  such  hair-splitting  can  prove  that  there  is 
soning  no  difference  between  those  terms.    The  other  argu- 

°"  '^  ■  ment  of  Kent  quoted  above,  based  on  the  spirit  of 
the  law,  is  better ;  and  still  it  may  well  be  asked  how  we  are 
to  know  what  the  object  of  a  law  is,  except  by  what  the  legis- 
lature says,  and  especially  how  we  are  to  know  what  means  the 
lawgivers  meant  to  have  used  to  accomplish  their  purposes  ex- 
cept by  looking  to  these  words ;  and  when  they  have  said 
"  previously,"  is  it  complimentary  to  their  intelligence,  to  say 
nothing  of  any  further  implication,  to  hold  that  they  meant 
concurrent  ? 

§  75.  A  National  Bank  may  deal  in  realty  as  follows  (see 
11.  §28):- 

(1)  It  may  buy  and  hold  what  it  needs  for  its  own  use  as 
a  bank. 

(2)  It  may  take  mortgage  or  trust  deeds  as  security  for  a 
debt  previously  contracted,  and  may  buy  in  the  land  at  a  judg- 
ment sale  under  such  deed  or  mortgage. 

(3)  It  may  buy  land  sold  under  any  judgment  held  by  it. 

8  Silver  Lake  Bank  v.  North,  4  Johns.  Ch.  370.         »  31  Grattan,  228. 
164 


NATIONAL   bank's   POWER   OP   DEALING   WITH    REALTY,      §  75 

(4)  It  may  take  a  conveyance  of  land  in  satisfaction  of 
previous  debt. 

(5)  It  may  buy  land  or  outstanding  title,  when  such  action 
is  necessary  to  save  a  debt  due  it,  (and  the  bank  is  the  one  to 
exercise  its  discretion  as  to  such  necessity,)  even  though  the 
land  exceeds  the  debt,  if  the  security  of  the  debt  is  the  real 
object.^ 

It  cannot  hold  possession  of  real  estate  more  than  five 
years,  except  under  the  first  clause. 

(a^  Whether  a  national  bank  can  take  real  estate  „   , 

V    ^  Real  security 

securitv,  bv  mortgage  or  ti'ust  deed,  for  a  concur-  on  concurrent 

1  •        1       1     r    1  loans. 

rent  loan,  is  doubtful. 

New  York,2  Illinois,^  Missouri,*  say  that  the  national  law 
clearly  forbids  a  bank  to  take  real  security  for  concurrent  or 
future  advances. 

(6)  The  United  States  Supreme  Court  in  Union  National  Bank 
V.  Mathews,^  after  saying  that  the  implication  is  clear  that  a 
loan  on  real  estate  is  forbidden,  proceeds  to  declare  the  spirit 
and  intent  of  the  prohibition  to  be  the  prevention  of  haz- 
ardous investments  by  the  bank,  the  keeping  of  its  money  in 
the  regular  channels  of  business,  and  the  prevention  of  accu- 
mulation of  masses  of  real  estate  in  their  hands,  and  that  the 
intent,  not  the  letter,  is  to  govern. 

The  court  further  says,  that,  as  there  was  only  a  deed  of 
trust  vesting  the  legal  title  in  a  third  person,  the   Trust 
bank  had  taken  no  title  to  land  and  so  in  any  event   '^^*^'^- 
had  not  violated  §  5137. 

These  sections  do  not  prohibit,  in  terms,  the  mortgage  of 
real  estate  to  a  third  party,  to  be  held  by  the  mortgagee  in 
trust  to  secure  a  loan  made  by  a  national  bank.  Hence, 
where  a  loan  was  made  upon  the  individual  note  of  one  part- 
ner in  a  firm  indorsed  by  his  copartner,  and  the  maker  mort- 
gaged real  estate  to  secure  the  indorser,  with  the  agreement 

^  §  75.    Upton  V.  National  Bank  of  South  Reading,  120  Mass.  153. 
2  Crocker  v.  Whitney,  71  N.  Y.  161. 
8  Fridley  v.  Bowen,  87  Til.  151. 

*  :Mathews  v.  Skinner,  62  Mo.  329. 

*  98  U.  S.  621.     See  §  754,  ultra  vires. 

165 


§  75  EXPANSIONS   OF   THE   POWERS   OF    A    BANK. 

tliat  in  case  of  default  the  security  should  inure  to  the  benefit 
of  the  bank,  it  was  held  that  the  transaction  was  valid,  and 
that  the  bank  could,  by  proceedings  in  equity,  reach  and  avail 
itself  of  the  security.*^ 

The  result  seems  to  be,  that  a  conveyance  whi(;h  carries  the 
legal  title  to  the  bank,  if  for  a  concurrent  loan  or  future  ad- 
vances, is  unlawful ;  but  a  trust  deed  or  mortgage  giving  legal 
title  to  a  tJdrd  person  for  the  benefit  of  the  bank,  and  as  secu- 
rity for  such  loan,  is  lauful. 

(jc')  One  thing  the  Mathews  case  did  make  perfectly  clear, 
viz.  that  whether  right  or  wrong,  if  a  national  bank  takes 
Effect  of  rt^'^l  estate  by  mortgage,  trust  deed,  or  conveyance 
Only  sovei-  f^hsolute,  no  onc  but  the  United  States  in  the  person 
eign  object.  qI  ^lie  comptroller  can  object ;  the  transaction  is 
perfectly  good  and  enforceable  between  the  parties. 

A  number  of  State  cases  had  ruled  otherwise  on  this  point, 
but  these  decisions  are  now  fossils,  buried  deep  under  this 
recent  deposit,  but  as  they  may  be  interesting  in  connection 
with  State  statutes,  I  will  keep  some  of  those  1  have  dug  up, 
and  arrange  them  for  exhibition  in  a  sort  of  museum  note  in 
Part  II. 

(fZ)  M.  obtained  a  loan  from  a  national  bank  on  short  time 
Merchants  paper,  and  deposited  as  security  a  note  of  W.  se- 
BankT'  curcd  by  mortgage ;  the  bank  had  the  note  of  M. 
Mears.  j^ud  otlicr  pcrsoual  security. 

The  court  said  a  national  bank  could  lend  only  on  personal 
security,  but  if  the  debtor  makes  default,  or  at  any  time  after 
the  loan  is  actually  made,  the  bank  may  take  real  security 
unless  so  soon  after  as  to  indicate  that  the  transaction  was  only 
colorable,  and  "  really  a  part  of  the  original  understanding." 

But  in  this  case  the  personal  security  was  ample  at  the 
time,  and  the  loan  was  therefore  on  personal  security,  and  not 
within  the  prohibition,  though  a  mortgage  was  also  taken  ; 
and  if  the  personal  security  becomes  insufficient,  and  the  bor- 
rower is  insolvent,  the  bank  can  maintain  a  bill  to  foreclose 
the  mortgage.' 

*  First  National  Bank  v.  Haire,  36  Iowa,  443. 

'  Merchants'  National  Bank  of  Chicago  v.  Mears,  8  Bissell,  158  (1878). 
1G6 


POWER  OF  DEALING  WITH  REALTY,  §  76 

True,  the  loan  was  on  personal  security,  and  therefore  good. 
But  as  §  5137  forbids  taking  a  mortgage  for  any  other  pur- 
pose than  to  secure  a  previous  debt,  as  between  the  United 
States  and  the  bank  taking  the  mortgage  it  could  hardly  be 
sustained  as  proper. 

(e)  And  where  an  indebtedness  already  existed,  and  an 
arrangement  was  made  whereby,  in  payment  of  this  and  to 
secure  the  bank  against  loss,  a  new  note  secured  by   _ 

'  ,     ,  ,     ,  ,  •'The  note 

a  mortgage  was  executed,  it  was  held  that  such  new   may  be  con- 
note and  mortgage  were  valid,  as  being  taken  in  pur-   the  debt  is 
suance  of  the  power  of  the  bank  to  adopt  reasonable    p*"^^"'""^* 
and  necessary  measures  for   the  collection    and   security  of 
debts  ;  a  power  necessarily  incident  to  the  power  of  banking.^ 

§  76.  Bank  as  Trustee  of  Realty.  —  In  this  country  the  gen- 
eral or  common  law  rule  is,  that  corporations  may  be  seised 
of  lands,  and  hold  other  property  in  trust,  for  purposes  not 
foreign  to  their  institution. ^ 

In  many  States  there  are  statutory  provisions  upon  this 
matter. 

{a)  In  New  York  there  is  an  act  concerning  money  corpora- 
tions which  decides  that  no  convevance,  assignment,  or  trans- 
fer  of  any  effects  for  the  benefit,  use,  or  security  of  any  such 
corporation  shall  be  valid,  unless  made  directh'  to  the  corpo- 
ration. This  refers  to  moneyed  corporations  chartered  by 
the  legislature  of  that  State,  and  has  no  application  to  foreign 
corporations.  And  if  land  be  conveyed  in  trust  for  the  ben- 
efit of  a  foreign  corporation,  the  corporation,  under  the  pro- 
visions of  another  act,  will  only  incur  the  penalty  of  not  being 
able  to  maintain  an  action  on  the  deed ;  but  the  conveyance, 
for  all  other  purposes,  will  be  good.^ 

(^)  Justice  Story,  in  Vidal  v.  The  May  or, -^  said  there  was 
no  objection  to  a  corporation  taking  realty  in  trust 
for  a  purpose  not  strictly  within  the  scope  of  its   "    " ' 

«  Shinkle  v.  First  National  Bank  of  Ripley,  22  Ohio  St.  51  fi. 

1  §  7(3.  2  Kent.  Com.  226.  See  First  Parish  in  Sutton  v.  Cole,  -3  Pick. 
237-2.}9,  249;  M'Girr  v.  Aaron,  1  Penn.  49;  Green  v.  Dennis,  6  Conn. 
304;  Theological  Seminary  of  Auburn  v.  Cole,  18  Barb.  360. 

2  Wright  ».  Douglass,  10  Barb.  97. 

8  Vidal  V.  Mayor,  2  How.  128.     See  8  Ohio  St.  217. 

1G7 


§  77  EXPANSIONS   OF   THE   POWERS   OF    A    BANK. 

direct  objects,  as  for  tlie  benefit  of  a  stranger  or  another 
corporation. 

(r)  Kent  says  corporations  have  no  powers  not  given  them, 
and  therefore  cannot  be  trustees  in  a  matter  where 
they  have  no  interest. 

But  if  property  is  granted  or  devised  to  them  partly  for 
their  use  and  partly  for  the  use  of  others,  they  can  execute 
the  latter  trust  as  a  necessary  incident  to  the  former.* 

It  is  pretty  well  agreed  that  only  the  State  can  object  to 
the  corporation's  right  to  take  land  in  trust.^ 

§  77.    Cases  upon  the  Pov^er  of  Banks  in  Relation  to  Stocks. 

—  See§  59. 

A  national  bank  cannot  buy  its  own  stock,  and  no  title 
passes  to  it.^ 

Where  a  bank  buys  its  own  stock  to  protect  itself  from  loss, 
it  may  sell  the  same  on  credit,  and  take  the  buyer's  note  as 
collateral  security.  The  buyer,  if  already  a  stockholder,  can- 
not avoid  the  sale  on  the  ground  of  false  representations 
made  to  him  by  the  officers  of  the  bank  as  to  its  stock  and 
condition.^ 

A  bank  cannot  speculate  or  traffic  cither  in  financial  secu- 
rities or  in  merchandise.  It  has  been  held  not  to  be  incidental 
to  the  banking  business,  nor  an  implied  power  pertaining  to  a 
bank,  to  buy  or  sell  stock  or  bonds.^  But  it  may  take  and 
hold  them  as  collateral  security,  and,  in  case  of  their  loss,  will 
be  liable  only  as  an  ordinary  bailee ;  that  is,  if  there  has  been 
an  absence  of  proper  and  sufficient  care  on  its  part.*  The 
measure  of  damages  will  be  the  value  of  the  bonds  at  the  time 
of  the  loss.^  A  bank  need  not  be  prohibited  by  its  organic 
law  from  engaging  in  such  traffic.     For  it  owes  its  powers  as 

*  In  re  Howe,  1  Paige,  214. 

6  Wade  V.  American  Col.  Soc,  7  Smodes  &  M.  607. 

^  §  77.  Meyers  v.  Valley  National  Bank,  18  Xational  Bankruptcy 
Register,  M. 

2  Union  National  Bank  v.  Hunt,  7  Mo.  App.  42. 

8  First  National  Bank  of  Charlotte  v.  National  Exchange  Bank  of 
Baltimore,  39  Md.  600;  Weckler  i-.  First  National  Bank,  42  Md.  581. 

*  Third  National  Bank  of  Baltimore  v.  Boyd,  44  Md.  47. 
6  Ibid. 

168 


DEALING   IN   STOCKS.  §  77 

it  owes  its  existence  to  the  terms  of  that  charter  or  law.  It 
is  not  restricted  like  an  individual  from  the  exercise  of  a  wide 
range  of  other  powers,  which,  in  the  absence  of  restriction,  it 
would  enjoy ;  but  its  power  to  do  any  act  at  all  is  due  wholly 
to  the  legislation  of  which  it  is  a  creature,  and  must  be  either 
the  direct  or  necessarily  incidental  gift  of  that  legislation. 
When,  therefore,  it  is  specifically  permitted  to  conduct  a 
banking  business,  it  has  no  power  to  do  any  other  species  of 
business ;  not  because  it  has  been  stripped  in  any  manner  of 
that  power,  but  because  that  power  has  never  attached  to  it. 
A  bank  may  however  do,  on  isolated  and  especial  occasions, 
or  for  certain  purposes,  what  it  cannot  do  generally,  and  for 
all  purposes.  It  cannot  buy  and  sell  merchandise,  but  it  can 
take  merchandise  from  a  debtor,  if  this  is  the  only  way  to 
save  the  amount  of  the  debt ;  and  of  course,  having  taken 
property  of  any  nature  for  this  proper  purpose,  it  may  sell  it 
in  any  manner  that  will  bring  the  best  price.  It  may  pur- 
chase public  stocks  in  order  to  deposit  them,  under  a  law 
requiring  such  stocks  to  be  deposited  as  a  security  for  cir- 
culation ;  or  in  order  to  invest  its  surplus  funds  in  them ;  it 
may  loan  upon  them  as  security,  and  sell  them  if  need  be  to 
save  the  debt.  But  it  cannot  "  traffic  "  in  them  ;  it  cannot  buy 
them  with  the  view  to  sell  them  shortly  at  an  anticipated 
advanced  price.  Such  would  not  fall  within  any  department 
of  the  general  province  of  banking,  which  alone  the  associa- 
tion can  carry  on,  and  which  it  must  carry  on  only  in  the 
manner,  with  tlie  powers,  and  for  tlie  objects  directly  set 
forth  or  necessarily  implied  in  the  law  of  the  corporate 
existence.'^ 

In  a  case  in  Vermont,  indeed,  it  was  once  said  that  a 
clause  in  a  bank  charter  prohibiting  the  bank  from  dealing  in 
any  goods,  wares,  merchandise,  or  commodities,  was  in  dero- 

«  Comstock  V.  AVilloughby,  Hill  &  Den.  271 ;  Talmage  v.  Pell,  3  Seld. 
328;  Leavitt  v.  Yates,  4  Edw.  Ch.  134;  Sackett's  Harbor  Bank  v.  President 
of  Lewis  County  Bank,  11  Barb.  213;  Portland  Bank  v.  Storer,  7  Mass. 
433  ;  Weckler  v.  First  National  Bank  of  Hagerstown,  42  Md.  581.  See 
also  Curtis  v.  Leavitt,  15  N.  Y.  9,  which,  properly  interpreted,  supports 
the  above  doctrine. 

169 


§  77       EXPANSIONS  OF  THE  TOWEHS  OF  A  BANK. 

gation  of  the  common  and  ordinary  powers  of  the  corporation. 
The  full  breadth  of  this  language  would  certainly  set  the 
doctrine  of  the  case  at  variance  with  the  views  expressed 
above.  But  the  reasoning  in  support  of  those  views  is  too 
clear,  and  the  authorities  arc  too  strong,  to  be  brought  within 
the  range  of  doubt  by  this  solitary  adjudication;  more  espe- 
cially since  the  sweeping  statement  of  the  legal  theory  in  that 
opinion  was  enunciated  for  the  insignificant  purpose  of  pro- 
tecting the  bank  in  a  purchase  of  shares  in  its  own  capital 
stock,  a  proceeding  which  could  have  been  defended  at  much 
less  expense  of  questionable  generalization.'^     See  §  59. 

(a)  A  national  bank  cannot  engage  in  selling  railroad  bonds 
on  commission.     In  Maryland^  the  court  say:  — 

"  To  the  usual  attributes  of  hanking,  consisting  of  the  right 
to  issue  notes  for  circulation,  to  discount  commercial  paper, 
jyfd.  (ii^d  to  receive  deposits,  this   law  adds  the  special 

Firs't'Nationai  power  to  huy  aiid  sell  exchange,  coin,  and  bullion ; 
Bank.  ][)ut  wc  look  in  vaiu  for  any  grant  of   power  to 

engage  in  the  business  charged  in  this  declaration.  It  is  not 
embraced  in  the  power  to  '  discount  and  negotiate  '  promissory 
notes,  drafts,  bills  of  exchange,  and  other  evidences  of  debt. 
The  ordinary  meaning  of  the  term  '  to  discount '  is  to  take 
interest  in  advance,  and  in  banking  it  is  a  mode  of  loaning 
money.  It  is  the  advance  of  money  not  due  until  some  future 
period,  less  the  interest  which  would  be  due  thereon  when 
payable.  The  power  '  to  negotiate '  a  bill  or  note  is  the  power 
to  indorse  and  deliver  it  to  another,  so  that  the  right  of  action 
thereon  shall  pass  to  the  indorsee  or  holder.  No  construction 
can  bo  given  to  these  terms,  as  used  in  this  statute,  so  broad 
as  to  comprehend  the  authority  to  sell  bonds  for  third  parties 
on  commission,  or  to  engage  in  business  of  that  character. 
The  appropriate  place  for  the  grant  of  such  a  power  would  be 
in  the  clause  conferring  authority  to  '  buy  and  sell ' ;  but  we 
find  that  limited  to  specific  things,  among  which  bonds  are 
not  mentioned,  and  upon  the  maxim,  Uxpressio  unius  est 
exclusio  alterius,  and  in  view  of  the  rule  of  interpretation  of 

'  Farmers  &  Mechanics'  Bank  v.  Champlain  Trans.  Co.,  18  Vt.  131. 
8  Weckler  v.  First  National  Bank,  42  Md.  581. 

170 


DEALING   IN    STOCKS.  §  78 

corporate  powers  before  stated,  the  carrying?  on  of  such  a  busi- 
ness is  prohibited  to  these  associations."  ^ 

Dealing  in  stocks  is  not  distinctly  prohibited  by  the  act,  but 
such  prohibition  is  implied  from  a  failure  to  grant  tlie  power. 
Yet,  in  adjusting  a  contested  claim,  the  bank  may  pay  more 
than  its  value,  so  as  to  obtain  stocks  in  an  honest  effort  to 
avoid  loss ;  and  tlien  it  may  sell  such  stock  in  the  market. 
Such  transactions  do  not  amount  to  a  dealing  in  stocks. 
Subject  to  the  restrictions  of  the  act,  the  bank  can  do  what  a 
natural  person  may  lawfully  do.^ 

A  national  bank  is  not  by  its  charter,  nor  by  its  statutory 
nor  its  incidental  powers,  authorized  to  act  as  broker  or  agent 
in  the  purchase  of  bonds  or  stocks.^*^ 

(J)  In  the  honest  exercise  of  the  power  to  compromise  a 
doubtful  debt  owing  to  the  bank,  it  can  hardly  be  doubted 
that  railway  stocks  may  be  accepted  in  payment  and  satis- 
faction, with  a  view  to  their  subsequent  sale  and  conversion 
into  money,  so  as  to  make  good  or  reduce  the  anticipated 
loss.^^ 

The  power  to  buy  or  sell  stocks  of  other  corporations  by  a 
national  bank  for  its  own  use,  is  nowhere  delegated  to  it,  nor 
is  it  an  incident  of  banking  business,  except  as  stocks  are 
taken  as  security  for  a  debt.  A  national  bank  holding  stocks 
as  security  may,  for  its  own  protection,  on  a  foreclosure  for 
default  in  payment  of  the  debt,  become  the  purchaser  to 
prevent  loss.^^ 

§  78.    Saving  Debt.  —  See  §§  CO,  77  b. 

A  Ccorgia  bank,i  to  secure  a  claim,  levied  on  the  Stonewall 
Iron  Works,  and  B.,  the  manager  of  said  works,   Ga. 
told  the  bank  that,  if  he  could  work  off  the  raw   .I's'si  "nee, V 
material  on  hand,  convert  it  into  pig  iron,  and  sell   et  a/.'^°" 

^  First  National  Bank  of  Charlotte  v.  National  Exchange  Bank,  2 
Otto,  122. 

10  First  National  Bank  of  Allentown  v.  IToch,  7  Weekly  Notes  of  Cas. 
298  (Penn.). 

"  First  National  Bank  of  Charlotte  v.  National  Exchange  Bank,  01 
How.  Pr.  320. 

12  Biirley  v.  Bowen,  quoted  in  Ball  on  National  Banks,  pp.  54,  110. 

1  §  78.    Reynolds,  assignee,  v.  Simpson  &  Ledbetter,  74  Ga.  454. 

171 


§  78  EXPANSIONS   OP   THE   POWERS   OF   A    BANK. 

it,  the  debt  due  the  bank  could  be  paid,  but  he  must  have 
supplies  to  do  this.  The  bank  thereupon  furnished  the  means 
to  cany  on  this  business,  and  the  court  held  its  action  intra 
vires. 

"  When  a  banking  corporation  acquires  possession  of  prop- 
erty, cither  by  a  lien  thereon,  or  by  the  ])urchase  of  the  same 
for  the  payment  of  a  debt  due  to  it,  and  expends  money  on  it, 
or  furnishes  supplies  either  for  its  preservation  or  to  carry  on 
the  business  in  which  such  property  is  employed,  with  a  view 
to  rendering  it  productive,  in  order  to  satisfy  the  debt  the 
bank  holds  against  the  former  owner  of  the  property,  it  is 
not  chargeable  with  exceeding  its  corporate  powers  by  en- 
gaging in  a  business  beyond  the  scope  and  purpose  of  its 
creation. 

"Whether  the  bank  used  its  power  of  collecting  its  debts  as 
a  pretext  for  embarking  in  a  business  foreign  to  that  for 
which  it  was  created,  and  which  it  was  authorized  to  conduct, 
or  whether  it  made  a  proper  use  of  it  in  furtherance  of  its 
legitimate  business,  was  fairly  submitted  to  the  jury,  and  their 
verdict  is  upheld  by  the  evidence."  ^ 

A  national  bank  lawfully  holding  a  mortgage  on  real  estate 
may,  to  protect  its  interests,  purchase  a  prior  mortgage  on  the 
same  real  estate.^ 

Under  the  United  States  Revised  Statutes,  §  5137,  a  na- 
tional bank  may  purchase  at  sheriff's  sale  land  mortgaged 
to  it  in  good  faith,  as  security  for  a  debt  previously  con- 
tracted.^ 

It  was  agreed  between  the  maker  and  the  accommodation 
indorser  of  a  promissory  note,  that  it  should  be  "  used  "  only 
at  a  certain  bank.  The  bank,  having  knowledge  of 
the  agreement,  allowed  the  maker  from  time  to 
time  to  draw  money,  holding  the  note  as  collateral  security. 
Held,  that  the  bank  might  sell  its  claim  against  the  maker, 
and  transfer  the  note  to  the  purchaser  as  collateral.* 

A  national  bank  that  has  loaned  money  on   timber  land 

2  Holmes  V.  Boyd,  90  Ind.  332. 
8  Heath  V.  Second  National  Bank,  70  Ind.  107. 
*  Proctor  V.  Whitcomb,  137  Mass.  303. 
172 


SAVING   DEBTS. 


§78 


may,  to  save  itself,  buy  in  the  land  at  foreclosure   Bank  may 
sale,  and  cut  and  sell  the  timber.^  timbe",  or 

An  agreement  by  a  bank  to  procure  the  release   rfieaL^oP* 
of  a  mortgage  held   by  a  third   person  on  lands   "'ortgage. 
upon  which  the  bank  also  holds  a  mortgage,  if  made  to  save 
the  debt  due  the  bank,  is  not  ultra  vires.^ 


5  Roebling  v.  First  National  Bank,  30  Fed.  744. 

6  McCrath  v.  National  Mohawk  Valley  Bank,  10  N.  E.  R.  862  (N.  Y., 
April,  1887). 

173 


CHAPTER   VIII. 

OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES. 

§  79.  Analysis. 

§  80.  Tlie  principles  of  estoppel,  ratification,  intent  of  parties  to  contract, 

"  qui  facit  per  alium,"  etc.,  and  the  rules  of  agency  in  general,  are 
what  we  have  to  keep  in  mind. 
§  81.  The  fourth  question  as  to  banking  business,  "  How  ?  " 

(a)  AVhat  the  stockholders  must  do. 
{b}   What  the  stockholders  may  do. 
§  82.  When  agents  are  necessary ;  the  questions  arising  from  their 

employment;  and  the  facts  precedent  and  subsequent  to  be 
considered. 
■When  the  Agent's  Act  is  that  of  the  Bank. 
§  83.  As  between  the  bank  and  the  agent. 

§  84.  As  between  the  bank  and  its  sovereign. 

§  85.  As  between  the  bank  and  a  surety  on  the  bond  of  an  oflBcer  of  the 

bank. 
§  86.  As  between  the  bank  and  third  persons  generally. 

Contractual  Acts  in  General. 
§  87.  May  not  bind  either  bank  or  agent. 

§  88.  But  one  or  both  may  be  liable  on  the  facts. 

{a)  Account  for  benefit. 
(h)  Agent  liable  in  case. 
§  89.         When  third  person  may  hold  bank  (general  rules). 

(o)  Ultra  vires  acts,  two  classes  of  cases. 
§§  90,  91.  When  bank  can  hold  third  party  (general  rules). 
(<-/)  Ratification. 
(/()    Ultra  vires. 
§  92.         When  the  agent  holds  third  party  (general  rules). 

Contractual  Acts.  —  Intent  of  Parties. 
§  93.  Exclusive  credit  to  agent. 

§  94.  Exclusive  credit  to  bank. 

When  agent  contracts  in  his  own  name  as  agent,  but  fails  to  sus- 
tain his  authority. 
§  95.  Concurrent  credit. 

(a)  Presumption  when  agent  contracts  in  his  own  name.     §  144  c. 

(b)  Wiien  agent  does  not  disclose  his  principal. 

(c)  Note  payable  to  cashier  may  be  sued  on  by  the  bank. 
{d)  Land  bought  for  bank  by  president  in  his  own  name. 

174 


OFFICERS   AND    AGENTS. — GENERAL   PRINCIPLES.  §  79 

§96.    Contractual  Acts.  —  Authority  of  Agent. 

§  97.     Actual  authority  by  organic  law,  vote,  usage,  verbal  order  of  superior, 

and  tacit  approval,  or  by  necessity.     See  §  165. 
§  98.     Inferred  or  apparent  authority.     See  98  (i),  (e),  (/),  (n) ;  §§  114,  142, 151, 
153,  165  c,  d,  174  «. 
(a)  Course  of  action  by  an  officer  without  objection  from  bank.     See 

§171^. 
{b)   Legal  and  proper  appointment  inferred. 
l)e  facto  officers. 

(c)  Inherent  powers  inferred  from  occupancy  of  office.    See  §  171,  d,  e. 
Expansion  of  §  98. 

(d)  Test  question,  —  Would  a  prudent  man   suppose  the  officer  had 

authority,  judging  from  the  conduct  of  the  bank,  as  known  to 
him,  actually  or  constructively  1 
(h)  Third  party  has  notice  if  he  knows  a  fact  which  would  lead  a  man 
of  ordinary  prudence  to  an  inquiry  which  would  disclose  the 
truth. 
(i)   Authority  cannot  be  inferred  beyond  what  could  legally  be  given 

by  the  power  whose  conduct  is  the  basis  of  inference. 
(/)  Ultra  vires  acts  may  bind. 
((/)  Bank  may  restrict  or  enlarge  inherent  powers,  but  not  to  affect 

parties  without  notice. 
{j)   Substitution  of  one  officer  for  another. 

Receipt  of  money  by  paying  teller. 
(k)  Representations.     §  103. 
Notice  to  agent.     §  104. 
(/)  Holding  out  by  usage. 

Opinion  of  U.  S.  S.  C. 
Bank  may  be  bound  to  innocent  party,  even  though  the  officer  acts 
fraudulently  or  idlra  vires, 
(l-n)  -j  Acts  within  the  ordinary  scope  of  an  office  bind  the  bank  in  favor 
of  an  innocent  third  party,  though  the  charter  limits  the  officer's 
powers  unknown  to  such  party.     §  9Sf. 
§99.     Contractual  Acts. — Adverse  Interest  of  Agent.    §§  109, 125, 6,  c, 

136,  167  e. 
§  100.       Revocation. 
§  101.       Ratification. 

(a)  Constructive  knowledge  of  facts  not  enough. 
(6)  Ratification  by  stockholders, 
(c)   Retention  of  proceeds  ratifies. 

(f/)  Directors'  approval  or  acquiescence.     §§  25  a,  168 ^r. 
§  102.   Tortious  Acts  in  General. 

Agent's  responsibility  to  bank.     §§  128,  147,  172. 
(a)  Agent's  responsibility  to  third  party.     §§  128,  147,  172,  717. 
(6)  Bank's  responsibility  to  an  agent. 

Bank's  responsibility  to  sovereign.     §  722. 
(c)   Bank's  responsibility  to  third  person. 

Grounds  of  liability  in  tort ;  authorization,  ratification,  control,  or, 
in  some  cases,  the  fact  of  being  in  the  best  position  to  prevent. 

175 


§  79  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

General  rule  of  bank's  liability. 
Ultra  vires  tort.     §  727/ 

Wilfulness  not  the  test ;  bank  liable  for  tort  in  course  of  business, 
even  thougii  contrary  to  express  directions. 
(</)  Statement  of  the  law  by  U.  S.  S.  C. 

Bank's  responsibility  for  correspondent  or  notary.     §  204. 
(e)   Cases  on  the  bank's  liability  for  ne<jU(jence.     §  9,  n.  10  ;  §§  264,  430, 
401,  482  e,  7U1. 
(e)  and  (//)     Tort  beyond  officer's  scope  ;  cask  of  gold.     §§  201,  202. 
(/)  Banks  do  not  warrant  the  general  honesty  of  officers. 

(y)  Negligence  of  directors  in  selecting  oflicer. 

Bank  not  responsible  for  remote  result,  felony  intervening, 
case  of  stolen  bills.     §  058. 
§103.   Representations.     §  42  c.  2,  §§  124,  145,  107,  108,  20.'}. 

General  rule.  May  amount  to  fraud,  warranty,  or  contract.  §  167. 
Information  as  to  past  transactions  is  courtesj',  unless  it  bears  on 
present  or  future  dealings.  §  107  c.  See  also  b. 
(a)  When  an  agent's  power  is  ascertained,  a  third  person  may  take  his 
representations  as  to  any  extrinsic  fact  peculiarly  within  the 
agent's  knowledge,  and  not  ascertainable  by  a  comparison  of  the 
act  done  with  tlie  terms  of  the  agent's  power,  and  pertaining  to 
the  business  for  which  the  agent  has  actual  or  implied  authority. 
What  representations  shall  be  considered  as  so  pertaining  to  the 
duty  of  an  agent  is  much  controlled  by  usage.  An  agent's  repre- 
sentations can  never  be  taken  to  prove  his  own  authority. 

(c)  Falsehood  told  by  one  officer  to  another. 

(d)  Teller's  assertion  that  an  indorsement  is  genuine. 

(e)  Representations  in  agent's  own  business,  as  known  to  party 

with  whom  he  is  dealing,  will  not  affect  the  bank. 
§  104.   Notice  to  the  Bank.     §  9,  n.  9;  §§  133,  146,  106. 

Grounds  of  decision,  communication,  and  identity. 
§  105.  Credibility. 

§  106.  Adverse  interest. 

§  107.  Special  duty  to  receive  such  notice. 

§  108.  Did  the  agent  act  for  the  Bank  in  the  matter  ? 

If  so,  did  the  information  come  during  such  action,  or  previously ; 

§  109.  (a)  and  if  the  latter,  then  how  long  before,  and  was  there  an 

(e)  (<;)  adverse  interest,  and  did  the  third  party  know  of  the  agent's 

having  notice,  and  not  of  his  adverse  interest. 

§  110.  Ratification  adopts  an  act  with  all  the  agent's  notice,  previous  or 

contemporaneous.     §§  101,  168  5^. 
§  111.  When  notice  to  agent  does  not  affect  the  bank. 

§  112.  Notice  to  a  single  director. 

Question  as  to  the  justice  of  holding  bank. 

(a)  Louisiana  court  favors  requiring  notice  to  a  majority,  or  to 

the  board. 

(b)  Conclusion  upon  the  argument. 

§  113.   A  note  on  the  competency  of  bank  officers  as  witnesses  for  the  bank. 

§  98  b.    De    facto    Ol'FICEUS. 

176 


OFFICERS   AND    AGENTS. — GENERAL   PRINCIPLES.  §  80 

§  80.  Except  by  way  of  illustration,  it  would  be  superfluous 
to  cite  cases  upon  the  maxim,  Quifacit  per  alium  faait  per  8e, 
or  the  principles  of  estoppel  and  ratification,  and  that  the  es- 
sence of  a  contract  is  the  intent  of  the  parties,  which  underlie 
a  great  part  of  this  chapter,  or  those  familiar  j)ropositions 
which  flow  from  these  axioms,  and  are  assumed  as  the  basis 
of  decision  throughout  the  country. 

The  business  of  an  incorporated  bank  ^  can  of  course  be 
conducted  only  by  agents  of  the  corporation,  or,  as  they  are 
commonly  styled,  officers  of  the  bank.  It  is  in  the  corporate 
shape  that  nearly  all  the  banking  business  in  the  United 
States  is  carried  on;  though  the  English  system,  by  which 
private  individuals  and  partnerships  enter  into  the  banking 
business,  is  by  no  means  unknown  among  us.  Even  in  this 
latter  species  of  arrangement,  however,  the  individual  or 
partnership,  if  the  business  be  tolerably  large,  must  appoint 
clerks  or  agents,  who  must  perform  the  functions,  and  may 
often  assume  the  titles,  of  certain  of  the  bank  officers,  —  not 
of  president  or  directors,  of  course,  but  of  cashier,  teller, 
book-keeper,  and  the  like.  In  either  case,  the  official  or 
clerk  is  in  fact  strictly  the  agent  of  the  corporation,  partner- 
ship, or  individual;   and  in  general  terras  it  may   jy^^^^^^f 

be   stated  that   the  ordinary  ru]6s  of  the  law  of  agency  sup- 
plies the 
agency  will    apply   for   the    settlement   of   all    ap-   rules  of  this 

propriate  questions.  These  rules  will  govern  all 
transactions  in  which  the  corporation  or  its  officials  are  par- 
ties, just  as  much  as  they  govern  all  transactions  in  which 
the  individual  and  his  clerk  are  parties.  It  makes  no  dif- 
ference that  the  principal  is  a  corporate  body,  and  that  the 
agent  has  an  official  designation.  His  title  serves  only  to 
show  in  what  class  of  dealings,  for  what  purposes,  and  with 
what  powers,  he  is  accredited  as  an  agent ;   and  the  simple 

^  §  80.  The  "  associations  "  of  Xew  York,  organized  under  the  stat- 
utes of  that  State,  differ  only  in  some  slight  and  insignificant  particu- 
lars from  ordinary  corporations.  For  all  the  purposes  of  the  matters  now 
under  discussion,  they  may  be  regarded  as  corporations.  Tlie  National 
Banking  Act,  §  8,  especially  declares  that  all  organizations  under  its  pro- 
visions, though  called  "associations,"  shall  yet  have  the  legal  character 
of  corporations. 

VOL.  I.  12  177 


§82  OFFICERS    AND    AGENTS. GENERAL    PRINCIPLES. 

legal  relationship  of  principal  and  agent,  as  it  is  well  under- 
stood in  its  constant  occurrence  between  individuals,  is  to  be 
found  with  precisely  the  same  legal  attributes  beneath  the 
corporate  impersonality  and  the  official  dignity .^ 

§  81.  The  fourth  question  concerning  banking  business 
was,  "How?"  And  in  considering  the  manner  in  which  it 
is  done,  the  chief  fact  calling  upon  our  attention  is  that  nearly 
the  whole  of  it  must  by  the  nature  of  the  case  be  carried  on 
through  agents. 

(a)  Some  acts  may  be,  some  must  be,  done  l)y  the  body  of 
stockholders;  for  example,  the  election  or  removal  of  direc- 
What  the  tors,  tlic  incrcasc  of  capital,  a  voluntary  dissolution, 
mu'sl^do ami  °''  abandonment,  or  any  act  involving  a  change  in 
may  do.  i\^q  organization  of  the  bank,  must  be  done  by  the 
stockholders  ;  and  any  transaction  infringing  on  the  private 
rights  of  stockholders,  as  a  gift  of  the  bank's  property,  or  a 
call  upon  the  shareholders,  requires,  in  the  absence  of  statu- 
tory provision,  the  consent  of  every  one  of  the  stockholders 
to  make  it  completely  valid. 

{b}  Beside  these  things,  which  must  be  attended  to  by  the 
corporate  body  itself,  there  are  many  others  which  may  or 
may  not  belong  to  its  sphere  of  action,  according  to  its  char- 
ter or  the  statute  under  which  it  is  organized,  and  the  action 
of  the  corporation  itself  in  the  disposal  of  its  powers.  For 
example,  the  power  of  making  by-laws  may  be  in  the  body  of 
stockholders,  or  in  the  board  of  directors  (11.  §  8)  ;  and  even 
where  the  whole  power  of  management  and  of  making  by- 
laws resides  in  the  directors,  the  stockholders  may  be  called 
upon  by  them  for  advice  and  instructions. 

§  82.   However,   no   such   unwieldy   body   as   that   of  the 
shareholders  could  ever  receive  deposits,  certify  checks,  col- 
lect debts,  or  do  any  of  the  acts  that  make  up 

N6CGssitv  of 

agents,  and  the  daily  routiuo  of  business.  Agents  are  ncces- 
qiTentq^ues-  sarv,  and  their  introduction  upon  the  scene  of 
tions.  action    gives    rise   to   complicated    and   important 

questions.     What  liabilities  exist  between  the  officer  and  the 

2  Frankfort  Bank  v.  Johnson,  24  Me.  490;  Atlantic  Bank  v.  Merchants' 
Bank,  10  Gray,  532. 

178 


QUESTIONS  GROWING  OUT  OF  AGENCY.         §  83 

bank  ?  When  is  tlic  act  of  the  agent  the  act  of  tlic  bank  ? 
When  is  the  individual  agent  responsible  to  the  third  party  ? 
The  problem  resembles  that  of  the  three  bodies  in  astron- 
omy, and  is  one  of  the  most  interesting  in  legal  dynamics. 
Many  facts  have  to  be  considered  in  seeking  a  solution.  The 
agent  (A.)  may  or  may  not  have  actual  authority  The  facts  to 
from  the  bank  (B.)  or  from  the  board  to  perform  ered?"*'  ' 
the  act  on  behalf  of  the  bank.  The  third  party  Precedent. 
(C.)  may  know  A.  is  acting  for  B.,  or  not.  B.'s  conduct  may 
be  such  as  to  lead  C.  naturally  to  infer  that  A.  acts  with 
its  approval.  A.  may  make  representations,  or  have  certain 
knowledge,  during  and  affecting  the  transaction.  C.  may 
have  notice  of  restrictions  on  A.'s  power,  or  of  other  facts 
bearing  on  the  matter,  or  he  may  give  exclusive  credit  to  A. 
The  act  may  be  intra  vires  of  the  bank,  or  ultra  vires,  and 
C.  may  or  may  not  have  notice  of  this.  A.  may  Icnoiv  he  is 
going  beyond  his  authority,  or  on  the  facts  as  known  to  him 
his  act  may  be  within  bounds,  and  yet  some  fact  out  of  sight 
make  it  really  wrongful.  An  agent's  action  may  be  subse- 
quently approved  by  the  bank  or  the  board  of  direc-  subsequent 
tors,  or  they  may  take  the  benefit  of  it  and  make  ^^'^^*' 
no  objection,  or  retain  A.  in  their  service  after  knowing  of  his 
wrong  conduct. 

§  83.  The  question  of  greatest  import  in  the  matter  before 
us  is.  Where  is  the  boundary  between  individual  and  corpo- 
rate responsibility  ?  when  is  the  agent's  act  that  of  the  bank, 
and  when  is  it  merely  his  private  affair  ? 

As  between  the  bank  and  the  officer  his  act  is  the  bank's 
only  when  it  is  done  with  the  bank's  own  consent  or  approval, 
or  is  ratified  by  it  with  a  knowledge  of  the  facts.  Bank  v. 
or  when  it  is  done  by  authority  or  approval  of  a  ^*<^'^^- 
superior  officer,  the  subordinate  having  no  notice  of  any  fact 
making  the  order  of  tlie  superior  wrongful,  or  when  it  is  rati- 
fied by  a  superior  officer  who  could  lawfully  have  authorized 
it.  Otherwise  as  between  the  bank  and  the  agent,  the  latter 
is  responsible  for  all  loss  directly  resulting  from  his  conduct 
in  the  business  of  the  bank,  which  fails  to  come  up  to  the 
standard  of  reasonable  skill  and  competency,  ordinary  care 

179' 


§84  OFFICERS    AND    AGENTS.  —  GENERAL    PRINCIPLES. 

and  attention  to  the  duties  of  his  office,  strict  obedience  to 
the  law  on  the  facts  reasonably  within  his  knowledge,  and  a 
course  of  conduct  unstained  by  any  bad  faith. 

The  right  of  action  of  the  bank  against  an  officer  for  his 
wrongful  or  fraudulent  act  seems  not  to  be  barred  by  the 
Statute  of  Limitations,  if  his  act  has  only  been  known  to 
himself  during  the  period.  It  is  his  duty  to  disclose  the 
fact  to  the  bank,  not  the  duty  of  the  other  officers  to  in(|uire 
of  him.  Thus,  where  the  i)rcsident  of  a  bank  receives  money 
of  the  bank,  to  be  applied  in  payment  of  a  specific  debt,  but 
does  not  so  apply  it,  and  the  bank  remains  in  ignorance  of 
the  fact  until  it  is  subsequently  compelled  to  pay  to  the  cred- 
itor, the  president  cannot,  when  sued  by  the  bank,  set  up  the 
Statute  of  Limitations  in  his  defence. ^ 

§  84.  As  between  the  bank  and  the  State,  there  is,  by  the 
nature  of  their  duties,  a  wide  difference  between  the  acts  of 
Bank  i'.  Sov-  thc  board  and  those  of  any  other  agent.  If  the 
ereign.  former   does    any    act  in  the   management  of  the 

bank's  business  or  its  property  wliich,  upon  facts  known  to 
them  or  wliich  might  be  known  by  the  exercise  of  reasonable 
diligence,  is  a  violation  of  the  law  under  wliich  the  bank  is 
organized,  it  is  the  act  of  the  bank,  and,  however  innocent 
the  stockholders  may  be,  may  cause  a  forfeiture;  they  have 
intrusted  the  management  to  the  directors,  and  must  abide 
the  result.     (Sec  Forfeiture.) 

The  directors  are  the  real  brain  and  judgment  and  control 
of  the  bank,  and  for  the  protection  of  the  public  their  action 
must  be  deemed  that  of  the  bank,  so  far  as  its  business  and 
property  are  concerned  ;  otherwise  the  bank  could  defy  for- 
feiture, and  violate  the  law  with  impunity,  by  a  continual 
change  of  officers. 

But  if  any  subordinate  officer  breaks  the  law,  the  question 
is,  Did  the  bank  or  the  board  authorize  the  act,  or  knowingly 
permit  it  or  adopt  it,  by  retaining  the  wrongdoer  or  the 
benefit  of  the  transaction,  knowing  the  facts  ?  If  so,  the 
bank  is  liable  to  forfeiture  on  the  reasoning  above.  When, 
however,  the  act  was  unauthorized,  and  the  directors  have 
1  §  83.  Atlantic  National  Bank  r.  Harris,  118  Mass.  147. 
180 


WHEN   IS   AN    agent's    ACT   THE   BANK'S   ACT?  §  86 

exercised  due  care  in  supervision,  and  when  the  fact  comes 
to  their  knowledge  they  repudiate  and  so  far  as  possible  undo 
the  wrong,  it  is  not  deemed  the  act  of  the  bank,  but  that 
of  tlie  individual  officer,  for  which  he  may  suffer  the  penalty 
of  the  law. 

The  difference  in  the  two  cases  lies  in  the  locus  of  control. 
The  reins  are  in  the  hands  of  the  directors,  and,  if  they  do  not 
do  their  duty  in  the  selection  of  horses  or  harness,  or  drive 
improperly,  the  owner  of  the  coach  may  well  be  held ;  but  if  no 
fault  attaches  to  them  or  to  the  owner,  it  would  be  carrying  lia- 
bility to  a  great  extent  to  hold  the  latter  for  the  stumbling  of 
one  of  the  horses.  If  those  in  control  of  the  hank  obey  the  law, 
the  public  will  be  little  exposed  to  wrong,  or  excess  of  power; 
and  no  necessity  for  the  public's  protection  existing,  as  in  the 
case  of  the  board,  it  would  be  hardly  fair  to  punish  the  innocent 
stockholders  for  the  occasional  fault  of  a  subordinate. 

If  the  board  violates  the  law  by  action  entirely  aside  from 
any  handling  of  the  property  or  business  of  the  bank,  as  if 
they  form  a  conspiracy  to  do  some  felony  or  overthrow  the 
government,  of  course  that  is  not  the  act  of  the  bank  ;  it  must 
be  done  in  the  course  of  their  management  of  the  bank,  its 
interests,  or  property. 

§  85.  Between  the  bank  and  the  surety  upon  the  bond  of 
an  officer,  no  act  of  the  board,  nor  of  any  one  beside  the 
stockholders,  can  relieve  the  surety  from  liability  Banks?, 
for  the  guaranteed  officer's  breach,  unless  it  is  other-  Surety. 
wise  nominated  in  the  bond.  The  very  purpose  of  the  bond  is 
to  secure  the  bank  against  the  fraud  or  incompetence  of  the 
officer,  and  its  value  would  be  slight  if  the  fraud  or  incompe- 
tence of  another  officer  precedent  or  subsequent  were  to  be 
the  death  of  the  surety's  obligation.     (See  Official  Bonds.) 

§  86.  We  will  now  consider  the  last  phase  of  the  problem 
in  which  the  bank  is  a  factor.  When  is  the  bank  responsible 
to  third  parties  for  the  act  of  its  agent,  and  when   Bank  v. 

^  1     •      1      T  '•^^''■'^  parties 

can  the  bank  hold  third  parties  upon  their  dealings   in  general. 
with  A.  ?    A  distinction  must  be  carefully  noted.     The  ques- 
tions, when  is  A.'s  act  B.'s  act,  and  when  is  B,  hound  hy 
the  act,  are  very  different  questions.     The   latter   is  not  a 

181 


§  87  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

question  of  agency.  B.  may  act  himself,  and  yet  not  be 
bound,  as  in  case  of  a  void  contract,  or  an  act  which  is  dam- 
num absque  injuria,  where  no  responsibility  attaches  in  con- 
sequence of  his  act.  In  the  case  of  a  Ixink,  when  it  is  once 
determined  that  a  certain  act  is  that  of  the  corporation,  the 
question  whether  it  is  bound  by  the  act  in  contract,  or  re- 
sponsible for  it  as  a  tort,  or  a  crime,  is  one  with  which  we 
are  not  concerned  here,  as  it  does  not  depend  upon  the  }>rin- 
ciples  of  agency.  It  may  just  be  noted  in  passing,  that,  if  the 
act  is  iritra  vires,  the  bank  is  bound  just  as  a  private  person 
would  be ;  if  ultra  vires,  its  responsibility  depends  on  prin- 
ciples discussed  in  §  722  et  seq. 

The  question  for  us  here,  and  it  is  one  of  great  importance, 
is  this :  When  is  an  agent's  contract,  tort,  knowledge,  repre- 
sentation, payment,  or  other  act,  that  of  the  bank  as  to  third 
parties  ? 

§  87.  Contractual  Acts.  —  First,  of  acts  from  which  arise 
contract  liabilities,  considering  them  in  relation  to  such  lia- 
bilities, as  distinguished  from  liabilities  in  tort. 

A  transaction  of  the  agent  A.  may  create  a  contract  be- 
tween the  bank  B.  and  a  third  party  C,  or  between  A.  and 
Neither         C.,  or  both  iu  ouc  transaction ;  or  though  one  of 

bound  oil  the  ,       .  .  ,  ,  ^^     r    •^ 

contract.  tlicsc  relations  IS  sought,  they  may  all  lail ;  as  ii 
A.  acts  beyond  or  without  authority  from  B.,  or  the  contract 
is  in  such  form  that  it  cannot  legally  be  the  act  of  B.  (as 
a  deed  in  A.'s  name),  or  if  C,  knowing  that  A.  is  acting  as 
an  agent,  gives  exclusive  credit  to  him,  and  with  one  or  other 
of  these  facts  which  prevent  B.'s  liability  on  the  transaction 
there  co-exists  a  fact  preventing  it  from  being  A.'s  contract, 
as  w^hen  he  uses  no  words  in  a  written  contract  that  can 
charge  himself,  and  in  any  case  where  there  are  no  circum- 
stances showing  that  any  credit  was  given  to  A. 

(There  are  other  cases  where  the  contract,  though  the  act 
of  A.  or  B.,  does  not  bind  either,  as  where  the  party  whose 
act  the  contract  is,  is  incapable,  or  the  consideration  fails, 
or  is  immoral  or  against  policy,  or  void  by  statute,  or  ultra 
vires  ;  but,  as  said  above,  these  are  matters  outside  the  subject 
of  this  division.) 
182 


CONTRACTS.  —  WHO    IS    BOUND.  §  8o 

§  88.  Although  the  transaction  may  not  be  such  as  to  hold 
either  the  agent  or  the  bank  on  the  contract,  yet  one  or  both 
may  be  held  by  obligations  implied  by  law  on  the  facts. 

Thus  a  committee  of  a  corporation  contracting  for  the 
company  with  full  authority  used  their  individual  seals  instead 
of  the  corporate  seal,  which  is  essential  to  the  making  of  a 
corporate  deed,  drawing  therefor  an  instrument  that  was 
not  their  own  contract,  for  they  could  not  individually  deed 
away  the  company's  land,  nor  the  company's  contract,  because 
of  its  form ;  yet,  as  they  acted  with  due  authority,  assumpsit 
could  be  brought  against  the  company  founded  on  the  obli- 
gation of  the  stipulations  in  the  instrument. 

(a)  So  benefits  of  any  kind  received  under  a  transaction  that 
fails  as  a  contract  express,  must  be  accounted  for,  and  in  any 
case  where  an  agent  A.  fails  to  give  the  third  person  Benefit  re- 
C.  a  right  of  action  against  the  bank  according  to  be  IccllTted 
the  tenor  of  his  agreement,  and  is  not  himself  bound  fo^. 
on  the  contract,  still  A.  is  liable  to  C.  in  case,  unless  the  fail- 
ure of  the  contract  is  due  to  facts  equally  withiii  the  contem- 
plation of  both  parties  A.  and  C. ;  as  if  A.'s  au-  Agent  liable 
thority  were  by  facts  unknown  to  him  revoked.       party. 

§  89.  Two  things  chiefly  must  be  taken  into  consideration 
in  determining  to  whom  belongs  a  given  contractual  act : 
1st,  the  intent  of  the  parties,  their  understanding  as  to  whom 
credit  is  given,  in  the  transaction  ;  2d,  the  authority  of  the 
agent,  actual,  inferred,  or  arising  by  ratification. 

(a)  The  general  principles  are  :  — 

First.  Unless  the  case  comes  under  the  fifth  head  below, 
C.  has  a  right  to  consider  the  act  of  A.  to  be  that  of  B.  when- 
ever A.  and  B.  are  really  identical  in  the  matter,  (whether  A. 
disclosed  to  C.  that  he  was  acting  for  B.  or  not,  ex-  Third  party 
cept  that  an  undisclosed  principal  cannot  be  subse-  ^°^'^^  ^^'^^' 
quently  held  to  his  injury,  as  if  he  has  settled  with  A.  while 
still  having  reason  to  believe  that  C.  is  giving  exclusive  credit 
to  A.,)  and  whenever  B.'s  conduct  has  been  such  as  to  warrant 
a  man  of  ordinary  prudence  in  concluding  that  A.  is  acting 
for  B.  with  his  approval  and  consent. 

For  example,  a  national  bank,  with  the  knowledge  of  its 

183 


§  89  OFFICERS   AND    AGENTS. — GENERAL    PRINCIPLES. 

officers,  "was  in  the  habit  of  receiving  money  on  deposit,  and 
issuing  certificates  therefor,  sometimes  in  its  own  name,  some- 
times in  that  of  Van  Camj)en,  the  })resident.  This  course  of 
business,  being  known  to  and  permitted  by  the  officers,  was 
with  authority  as  to  third  i)arties,  and  the  bank  was  held 
liable  to  a  depositor  who  took  a  certificate  purporting  to  be 
issued  by  Van  Campen  personally,  the  depositor  believing  it 
to  be  the  obligation  of  the  bank,  and  so  accepting  it.^ 

(h)  Also,  if  A.'s  act  ostensibly  and  avowedly  for  B.  is  after- 
ward, with  knowledge  of  the  facts,  ratified  by  the 
power  which  could  have  given  previous  authority. 

(e')  And  one  class  of  cases  goes  a  step  beyond  all  this,  and 
holds  that,  even  when  C.  knew  that  the  officer  or  the  board 
were  acting  ultra  vires  of  the  bank,  and  therefore  of  course 
Benefit  re-  bcvond  tlicir  autliority,  yet,  if  the  bank  receives  and 
ukrn'vires,  rctaiiis  tlic  beiicfit  of  the  transaction,  it  cannot  in- 
caL^s^^Vee  tcrposo  the  plea  of  ultra  vires  in  a  suit  upon  the 
§  ''-2-  contract.     This  amounts  to  sustaining  against  the 

principal  a  contract  made  by  an  agent  beyond  his  authority, 
for  it  is  not  necessary  that  the  stockholders  should  act  in  the 
matter ;  it  is  sufficient  if  the  hoard  of  directors  receive  and 
retain  the  benefit  for  the  bank.  This  applies,  of  course,  only 
to  executed  contracts,  no  agent's  executory  contract  ultra 
vires  of  the  bank  can  bind  it,  whether  C.  knew  or  not  of  its 
true  character. 

(d)  Another  less  numerous  but  more  consistent  cla^s  of 
cases  hold  that  the  act  of  an  agent  beyond  his  authority,  and 
True  rule.       known  bv  C.  actuallv  or  constructivelv  to  be  so,  is  not 

2d  class  of  •  -^  ,~  7      7,7 

ultra  vir^s  the  act  of  the  bank  as  to  C,  and  it  cannot  be  held 
§  722,  on  tlie  contract^  although  if  it  has  received  benefit 

by  reason  of  the  transaction,  it  must  account  for  the  same. 

(e)  In  general  all  acts  of  an  agent  that  are  done  officially ,2 
and  that  fall  within  the  scope  of  his  powers  and  duties,^  are 

1  §  89.  West  V.  First  National  Bank  of  Elmira,  20  Hun,  408.  See 
Smith  V.  Rathburn,  88  N.  Y.  660;  Germania  Ins.  Co.  v.  R.  R.  Co.,  72 
N.  Y.  91 ;  Upton  v.  Tribilcock,  91  U.  S.  50.  * 

2  Hughes  V.  Bank  of  Somerset,  5  Litt.  45. 

8  New  Hampshire  Savings  Bank  v.  Downing,  16  N.  H.  187. 
184 


CONTRACTS.  —  WHO   IS   BOUND.  §  90 

in  law  the  acts  of  the  corporation  itself.  Whether  these  be 
rightful  or  wrongful,  innocent  third  parties  have  the  right  to 
regard  them  in  this  light,  and  the  law  will  thus  construe  them. 
In  like  manner,  knowledge  obtained  by  the  agent  in  his  offi- 
cial capacity,  and  within  the  scope  of  his  agency,  will  affect 
the  corporation  ;  and  declarations  made  by  him  in  the  like 
manner,  and  within  the  like  range,  will  bind  the  corporation. 
But  acts  done,  knowledge  obtained,  or  declarations  made, 
heyond  such  scope,  or  not  in  an  official  capacity,  do  not  affect 
the  company  at  all.* 

The  bank's  liability  to  third  parties  is  not  affected  by  the 
fraud  of  the  officer  upon  the  bank  in  the  transaction,  if  it  was 
unknown  to  such  third  party .° 

§  90.  Second.  The  bank  can  hold  a  third  person,  C,  as 
to  a  contract  made  with  it  directly,  so  far  as  its  agent  was 
really  acting  for  it  (under  authority  directly  from  p^nk  holds 
the  organic  law,  or  from  the  bank  itself,  or  from  ^'"'"'^  v-^^^y- 
the  lawful  order  of  a  superior,  or  recognized  usage,  or  neces- 
sity), unless  exclusive  credit  was  given  to  A.  under  the  fifth 
head  below,  and  so  far  as  his  action,  though  without  actual 
authority,  was  ostensibly  for  the  bank,  and  with  knowledge  of 
the  facts  has  been  adopted  or  ratified  by  that  body  which 
could  have  authorized  the  act  previous  to  its  performance, 
[bearing  in  mind,  however,  that  although  the  general  rule  is 
that  ratification  discharges  an  agent  from  responsibility  to  his 
principal,  (or  to  the  third  person,  C,  except  so  far  as  ex- 
pressly bound  by  the  contract,)  and  makes  the  act  of  the  same 
effect  as  if  with  antecedent  authority,  yet  C.  cannot  be  af- 
fected injuriously  by  the  ratification  where  his  conduct  in  the 

*  Bank  of  Columbia  v.  Patterson's  Adm'r,  7  Cranch,  299;  Fleckner  v. 
Bank  of  United  States,  8  Wheat.  o38;  Atlantic  Bank  v.  Merchants'  Bank, 
10  Gray,  532;  Fulton  Bank  v.  N.  Y.  &  Sharon  Canal  Co.,  4  Paige,  127; 
Boom  V.  City  of  Utica,  2  Barb.  104;  New  England  F.  &  M.  Ins.  Co.  v. 
Schettler,  38  111.  1G6;  Wright  v.  Georgia  R.  R.  &  Banking  Co.,  34  Ga.  330; 
Hartford  Bank  r.  Hart,  3  Day,  493;  Wyman  v.  Hallowell  &  Augusta 
Bank,  14  Mass.  62;  Salem  Bank  v.  Gloucester  Bank,  17  id.  1,-  Madison 
&  Indianapolis  R.  R.  Co.  r.  Norwich  Savings  Soc,  24  Ind.  457. 

^  Citizens'  Savings  Bank  v.  Blakesley,  42  Ohio  St.  645. 

185 


§  93  OFFICERS   AND    AGENTS, — GENERAL   PRINCIPLES. 

mean  time  must  deijcnd  on  tlic  (luustion  wlicther  the 

U.  cannot  be  .  '       _ 

piejiuiuL'd  by  act  was  With  i)0\vcr  at  tlie  timi'  ;  for  example,  if  A. 

ratilication.  .  ,  ,        .  ,  i     i>  -  i       <•  /-, 

Without  autlionty  demaud  J),  s  goods  from  C,  no 
ratification  can  niai<c  C/s  refusal  a  conversion,  for  the  delivery 
to  A.  would  not  have  been  good.  So,  if  A.  makes  an  unauthor- 
ized demand  for  a  debt  due  to  B.  from  C,  a  ratification  will  not 
prevent  C.  from  pleading  a  previous  tender ;  for  if  he  had  paid 
A.,  it  would  have  been  no  discharge  of  the  debt.  So  also  no- 
tice of  dishonor  by  a  stranger  is  not  good  by  ratification.^] 

Also,  if  a  third  person,  C,  holds  the  bani<,  i>.,  to  a  contract 
made  by  A.  without  actual  authority,  and  not  ratified,  13.  can 
hold  C.  to  a  fulfilment  of  his  own  part  of  the  agreement. 

(b)  And,  as  under  the  first  head,  there  is  a  class  of  cases 
holding  that  the  bank  can  hold  C.  to  his  part  of  an  ultra  vires 

contract  when  C.  has  received  a  benefit  from  the 

L  Itra  vires.  .  i  •    i    i 

transaction  which  he  cannot  or  will  not  give  up."^ 

§  91.  Third.  If  A.  acts  neither  really  nor  ostensibly  for  the 
bank,  it  cannot  assume  the  contract. 

§  92.  Fourth.  If  A.  avowedly  contracts  for  the  bank,  but  is 
himself  the  real  principal,  he  must  give  the  third  person,  C, 
notice  of  his  real  character  before  he  can  sue  him,  and  if  the 
fact  that  the  bank  was  supi)osed  by  C.  to  be  a  party  entered 
into  the  consideration,  A.  cannot  hold  C.  at  all,  if  the  contract 
is  executory  on  A.'s  side,  nor  can  he  in  any  case  avoid  any 
defence  C.  could  have  made  if  A.  had  told  the  truth. 

§  93.  Fifth.  Intent  of  the  Parties.  —  If  the  third  person, 
C,  (not  being  ignorant  of  the  existence  of  a  principal  behind 
^    ,   .  A.,  to  whom  he  might  have  given  credit  if  known), 

Exclusive  "  °  ^ 

credit  to  the    givcs  cxclusivc  Credit  to  the  agent,  A.,  as  where  a 
"     '  bond  is  given  in  A.'s  name,  or  the  circumstances 

show  that  the  contract  was  intended  to  be  exclusively  between 
A.  and  C,  the  bank  can  neither  sue  nor  be  sued  on  the  con- 
tract, though  it  may  be  entitled  to  the  benefit  of  it,  or  con- 
cluded by  it,  and  entitled  to  collateral  rights,  and  subject  to 
and  entitled  to  remedies  growing  out  of  it. 

1  §  90.  Stanton  v.  Blossom,  14  Mass.  IIG.         2  See  ultra  vires,  §  722. 
186 


CONTRACTS.  —  WHO    IS    BOUND.  §  95 

§  94.    Sixth.    If  the  third  party,  C,  f^ives  exclusive  credit 
to  the  bank,  the  agent  is  not  generally  liable  on  the  contract, 
though  he  may  be  liable  in  case  for  any  misrepre-   p^^^^^gj^.g 
sentation  or  fraud  ;  however,  if  A.  contracts  in  his   credit  to  the 

1  1-         1  •  i    j^-  1  bank. 

own  name  as  agent,  addmg  Ins  representative  char- 
acter, and  he  fails  to  sustain  his  right  to  this  addition,  his 
name  will  stand  without  the  annex,  and  he  will  be  personally 
bound  by  the  contract,  if  it  is  one  he  could  make  himself.^ 

§  95.  Seventh.  Whenever  it  is  the  understanding  of  the 
parties  A.  and  C.  to  a  contract,  that  credit  is  given  to  both 
the  agent,  A.,  and  the  bank,  B.,  or  both  A.  and  B.  concurrent 
are  really  interested  in  the  contract,  or  one  is  a  *^*"*^'^"^' 
party  and  the  other  interested,  it  is  the  contract  of  both 
A.  and  B.,  except  that  only  the  named  parties  to  a  sealed  con- 
tract can  sue  or  be  sued  directly  on  the  contract,  and  that, 
whenever  exclusive  credit  is  given  to  A.,  and  the  understand- 
ing is  tliat  the  principal  is  not  to  sue  or  be  sued  on  the  con- 
tract, this  excludes  B.  from  action  on  the  contract  directly. 
But  A.'s  right  to  sue  on  a  concurrent  contract  is  subordinate 
to  that  of  B.,  (as,  if  B.  sues  first  or  discharges  C,  A.'s  right  is 
superseded,)  except  when  A.  has  a  lien  or  other  interest  in 
the  subject  matter  of  the  agency,  then  he  may  enforce  his 
right  against  both  B.  and  C. 

(jx)  There  is  a  concurrent  contract  by  presumption  of  law 
whenever  A.,  having  authority  to  make  a  contract  (not  under 
seal),  makes  it  in  his  own  name,  unless  the  cir-  presumption 
cumstances  make  it  clear  that  exclusive  credit  was  tracurin" 
given  to  A.,  and  both  parties  intended  that  no  re-  -A^'s name. 
sort  should  be  had  by  or  against  the  bank  on  the  contract  in 
any  event.  And  this  whether  A.  describes  himself  as  an  agent 
or  not,  and  whether  the  third  party,  C,  knew  of  the  principal, 
B.,  or  not.i  Either  A.  or  B.  can  sue  and  be  sued  in  such 
cases,  A.  as  the  party  to  the  contract,  B.  as  the  party  in  inter- 
est, and  for  whose  benefit  the  contract  was  made. 

(5)  When  A.  does  not  disclose  that  he  is  acting  as  an  agent 

i§94.     See  §  128  n. 

^  §  95.    Story  on  Agency,  §  IGO  a. 

187 


§  96  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

for  B.,  C.  cannot  be  liold  to  have  elected  to  give  exclusive 
credit  to  A. ;  for,  not  knowing  of  any  one  else  in  the  matter, 
lie  had  no  chance  to  make  the  election  which  might  have  re- 
sulted if  he  had  known  A.  was  acting  as  agent,  and  this 
holds  cxcej)t  where,  as  in  the  case  of  a  foreign  agent,  it  would 
be  a  conclusion  of  law  that  exclusive  credit  was  given  to  A., 
even  though  B.  were  known. 

If  A.  contracts  in  his  own  name,  and  his  principal  afterward 
becomes  known,  C.  may  elect  which  he  will  hold.^ 

(c)  A  note  payable  to  the  cashier  of  a  bank,  being  the  prop- 
erty of  the  bank,  is  by  fair  construction  a  contract  with  the 
Note  to  bank,  and  it  can  sue  in  its  own  name,  as  the  real 
cashier.  party  in  interest.^     It  can  also  be  sued  on  by  the 

cashier.*  So  an  order  payable  to  "  T).  H.  Neale,  Pres.,"  may 
be  the  subject  of  suit  by  the  corporation  as  the  real  party.^ 

(cZ)  So,  where  land  conveyed  in  trust  to  secure  a  debt  due 
the  bank  was  sold  under  a  prior  incumbrance,  and  the  presi- 
dent boujrht  the  land,  taking  a  deed  in  his  own 

Land  bought  /?        .  ,     ,  ?  ,         ,       ,        i  i      • 

in  name  of  name,  dclivermg  the  note  held  by  the  bank,  and  giv- 
presi  eu  .       .^^  j^.^  ^^^  ^^^^  ^^^  ^^^  balance  secured  by  deed  of 

trust,  it  was  held  that,  as  the  facts  clearly  showed  the  pur- 
chase to  have  been  for  the  bank,  and  that  the  president  had 
power  to  make  it,  although  the  president  was  the  legal  party, 
yet  in  equity  the  bank  must  relieve  the  estate  by  paying  the 
note  given  by  the  president.^ 

And  this  is  in  agreement  with  the  whole  current  of  reason 
and  decision,  though  Walker  and  Scholfield,  JJ.,  dissented.^ 

§  90.  Authority  of  Agent.  —  A  third  party,  C,  can  hold  the 
bank  to  A.'s  act  as  if  it  were  the  bank's  own  act,  if  A.  had 
actual  or  inferred  authority.  The  converse,  however,  is  not 
true ;  for,  as  was  seen  under  the  first  head,  some  cases  hold 
the  act  B.'s  where  there  was  no  authority,  either  actual  or 
inferred,  and  ratification  may  transfer  A.'s  act  to  B. 

2  2  Smith's  L.  C.  375. 

8  Commercial  Bank  v.  French,  21  Pick.  486. 
*  Johnson  v.  Catlin,  27  Vt.  89. 
6  Eastern  R.  R.  Co.  v.  Benedict,  5  Gray,  5G1. 
6  Libby  v.  Union  National  Bank,  99  111.  022. 
188 


AUTHORITY   OF   OFFICER.  §  97 

§  97.  Eiglith.  Actual  Authority  is  really  existing  a  priori 
ground  for  holding  the  act  of  A.  to  be  that  of  B.  It  may 
arise,  — 

(1)  By  the  organic  law,  as  in  case  of  the  power  of  direc- 
tors of  a  national  bank.     (II.  §  8.) 

(2)  By  action  of  the  corporate  body. 

(3)  By  lawful  vote  or  verbal  order  of  the  board  of  directors, 
or  other  superior  officer  to  the  one  doing  the  act.  But  if  the 
superior  exceeds  his  powers  in  giving  the  command,  there  is 
no  actual,  though  there  may  be  inferred  authority. 

(4)  By  appointment  to  an  office  to  which  certain  powers 
belong  inherently,  so  far  as  these  are  not  restricted  by  the 
bank  or  the  directors. 

(5)  By  a  long  continued  course  of  dealing,  or  series  of 
acts  with  the  knowledge  of,  and  without  objection  from,  the 
power  which  could  expressly  authorize  the  acts.  This  is  the 
way  in  which  inherent  powers  arose.  They  are  usages  judi- 
cially ascertained,  the  latest  addition  of  large  importance 
being  the  inherent  authority  of  a  cashier  to  certify.  But 
no  authority  is  born  of  a  series  of  acts,  if  each  one  is  done 
under  special  authority.     (See  7  below.) 

(6)  By  necessity.  Whenever  an  emergency  exists  calling 
for  immediate  action  for  the  manifest  interest  of  the  bank, 
the  officer  has  authority  to  do  the  act  by  necessity. 

(7)  Performing  an  act  a  series  of  times,  but  each  time 
under  special  authority,  creates  no  general  authority.     The 
fact   that   an  act  has  been  several  times  done  by   Nousaire 
an   officer,  who   has,   however,   on   each   occasion   fpecll/lu^ 
performed   it   in   pursuance  of  a  vote  or  instruc-   thority. 
tions  of  the  directors,  does  not  constitute  such  a  custom  for 
him  to  do  the  act  as  to  make  it  binding  upon  the  bank  when 
he  does  it  without  such  authority  ;  and  this  is  the  case  even 
where  the  outside  party  with  whom  he  is  dealing  knows  that 
the  act  or  duty  has  been  frequently  performed  by  him  in  the 
past.     Thus,  where,  by  verbal  consent,  or  under  direction  of 
the  investment  committee  of  the  directors  of  a  savings  bank, 
the  treasurer  had  frequently  assigned  mortgages  to  a  pur- 
chaser, it  was  held  that  no  such  general  or  implied  authority 

189 


§  98  0FFICP:RS    and    agents. general    PI!INCIPLES. 

fi)i-  him  to  execute  assignments  of  mortgages  arose  as  to 
make  liis  assignment  of  one  valid,  in  a  case  where  he  did  so 
without  instructions  from  the  committee,  though  the  assignee 
knew  that  such  assignments  had  often  j)reviously  been  exe- 
cuted by  tliis  oflicer,^ 

§  98.  Ninth.  Inferred  Authority  of  an  agent  is  such  as 
reasonably  appears  to  exist  upon  ihQ  facts  of  which  the  party 
C,  dealing  with  him  as  agent,  has  actual  or  constructive 
knowledge,  though  in  fact  there  may  be  no  actual  authority. 
C.  in  this  matter  must  be  held  to  a  knowledge  of  the  law 
and  of  facts  to  which  he  would  have  been  led  by  the  exercise 
of  such  diligence  as  men  of  ordinary  prudence  display  under 
similar  circumstances,  and  to  correct  reasoning  upon  such 
facts. 

It  is  important  to  remember  that  no  authoi'ity,  actual  or 
inferred,  can  arise  except  by  law,  or  the  act  of  the  bank,  or  of 
a  superior  .officer.  A.  himself  cannot,  by  any  mere  words  or 
acts  of  his  own,  create  or  enlarge  his  powers.  The  inference 
must  be  from  the  conduct  of  those  who  can  command  him, 
and  it  must  be  a  reasonable  inference  from  the  facts  fairly 
within  C.'s  reach.  For  example,  if  the  directors  order  the 
cashier  to  make  a  loan,  and  C.  has  no  notice  that  it  is  ultra 
vires  as  being  beyond  the  legal  limit,  his  inference  that  it  is 
with  authority  is  proper. 

(a)  If  A.  openly,  and  for  a  long  time,  does  certain  things 
without  special  authority,  and  there  is  no  objection  from  the 

directors,  C.  properly  infers  A.'s  authority  ;  for  if 

Course  of  ac-  i  i       i         .1  .     . 

tion  without  tlic  directors  knew  of  A.'s  conduct  it  is  a  clear  case 
of  estoppel,  and  if  this  action  was  so  open  and  long 
continued  that  they  would  have  known  of  it  by  reasonable 
diligence,  the  bank  cannot  take  advantage  of  the  neglect  of 
its  agents  in  their  duty,  as  against  one  misled  and  injured 
thereby. 

(b)  If  the  directors  allow  A.  to  perform  the  duties  of  a 
Lepi  np-  given  office  for  a  length  of  time,  a  third  person,  C, 
infenJd"        is  justified    in   inferring  his   regular  appointment 

1  §  97.     Holden  v.  Phelps,  135  Mass.  61. 
190 


DE    FACTO    OFFICERS.       "  §  98 

and  aiithority  to  act  according  to  the  customs  of  that  office, 
and  the  same  principle  api)lies  to  the  directors  themselves. 

Officers   de   Facto. 

The  bank  will  be  bound  by  the  acts,  within  the  scope  of  his 
apparent  agency,  of  any  one  who  is  its  officer  de  facto.  The 
bank  holds  him  out  as  its  officer,  and  as  having  the  right  and 
duty  to  perform  certain  functions  ;  and  it  is  as  fully  respon- 
sible as  if  this  right  and  duty  had  been,  in  every  stage  of  its 
growth,  perfect.  Such  facts  as  that  he  has  never  been  regu- 
larly or  formally  inducted  into  office,  that  all  the  requisites 
for  his  entry  upon  the  active  performance  of  its  duties  have 
not  been  complied  with,  —  even  that  originally  he  was  not 
legally  eligible  for  the  office,  —  will  not  suffice  to  free  the  bank 
from  its  liability  upon  the  acts  which  it  has  permitted  him  to 
do  in  its  behalf.  Thus,  directors  coming  into  office  through 
formalities  purporting  to  be  legal  and  sufficient,  are  directors 
de  facto.,  and  if  their  election  was  actually  illegal  they  can  yet 
only  be  ousted  by  writ  of  quo  ivarranto.  One  formally  ap- 
pointed cashier  may  bind  the  bank  as  a  teller,  if  he  is  allowed 
as  a  matter  of  fact  to  perform  the  functions  of  a  teller. 
Neither  does  the  fact  that  one  appointed  to  an  office  fails  to 
take  the  oath,  or  to  file  the  bond,  which  may  be  prescribed  by 
statute  or  by-laws,  vitiate  or  invalidate  any  of  the  acts  done 
by  him  during  his  actual  incumbency.^  In  the  cited  case  of 
Baird  v.  Bank  of  Washington,  less  than  a  quorum  of  the  di- 
rectors elected  a  person  to  fill  a  vacancy  in  their  board.  The 
proceeding  w^as  of  course  irregular  and  illegal.  But  the  per- 
son so  chosen  appeared  at  a  subsequent  meeting  and  voted. 
His  presence  and  his  vote  were  necessary  to  make  a  majority 
in  the  quorum  then  present.  Nevertheless,  the  action  taken 
at  the  meeting,  and  only  taken  by  his  assistance,  was  sus- 
tained as  binding  the  bank,  on  the  ground  that  he  had  come 

1  §  98.  Bank  of  the  United  States  v.  Dandridge,  12  Wheat.  64;  Minor 
V.  Mechanics'  Bank  of  Alexandria,  1  Pet.  46;  Delaware  &  Hudson  Canal 
Co.  V.  Pennsylvania  Coal  Co.,  21  Penn,  St.  131;  Cooper  v.  Curtis,  30  Me. 
488;  Smith  v.  Bank  of  the  State,  IS  Ind.  327;  Baird  v.  Bank  of  Wash- 
ington, 11  Serg.  &  R.  411. 

191 


§  98  OFFICERS    AND    AGENTS.  —  GENERAL    PRINCIPLES, 

in  under  color  of  title,  had  never  been  ousted,  and  so  was  a 
director  de  facto. 

An  assignment  executed  by  bank  ofiicers  after  tlieir  term 
had  expired,  under  authority  from  stockholders  granted  be- 
fore, held  valid  ;  the  charter  providing  that,  if  election  did 
not  take  place  on  the  ))roper  day,  the  corporation  should  not 
be  deemed  dissolved.  The  president  and  cashier  were  officers 
de  facto,  if  not  dc  jure.^" 

{c)  Whenever  A.  really  holds  an  olTice,  or  C.  properly  in- 
fers that  he  does,  the  powers  inherent  in  such  office  are,  in 
Inherent  pow-  ^^ic  abscncc  of  uoticc  of  restriction,  properly  in- 
er*  inferred,  fcj-red  to  bcloug  to  A.  An  official  title  connotes 
certain  powers  and  duties,  and  the  officers  of  a  bank  are  held 
out  to  the  public  as  having  authority  to  act  according  to  the 
general  usage,  practice,  and  course  of  business  of  such  office 
in  such  institutions  ;  and  their  acts  within  this  scope  bind  the 
bank  in  favor  of  third  persons  having  no  knowledge  that 
their  position  does  not  truly  represent  their  power.^ 

((7)  This  matter,  being  of  much  ira])ortance,  will  be  ex- 
panded to  some  degree  in  order  fully  to  illustrate  the  opera- 
tion of  the  princii)le. 

Expansion.  —  Any  person  who  deals  innocently  with  the 
agent  or  officer  of  a  corporation  within  the  scope  of  that 
agent's  or  oflicer's  functions  will  be  fully  protected,  and  will 
have  his  contract  enforced  by  the  law.  This  rule  accords 
so  perfectly  with  both  law  and  justice  that  it  has  never  been 
directly  assaulted,  save  in  one  class  of  cases.  These  are 
where  the  agent,  acting  indeed  within  the  general  and  ordi- 
nary scope  of  the  agency,  is  yet  in  fact  contravening  some 
express  order,  or  exceeding  some  special  limitation  of  au- 
thority, imposed  upon  him  in  derogation  of  his  natural  and 
usual  power.  When  such  cases  have  arisen,  cor})orations 
have   sometimes  sought  to  avoid  responsibility  by  insisting 

1"  IMilliken  v.  Steiiier,  50  Ga.  251. 

2  Minor  v.  Mechanics'  Bank  of  Alexandria,  1  Peters,  4(5,  70;  Fleckner 
V.  Bank  of  United  States,  3  Wheat.  3G0,  301 ;  Frankfort  Bank  r.  Johnson, 
24  Me.  400;  Merchants'  Bank  v.  State  National  Bank,  10  Wall.  604;  Cooke 
V.  State  National  Bank,  52  N.  Y.  90. 
192 


INFERRED    AUTHORITY.  §  98 

that,  since  their  agent  had  exceeded  his  powers  lie  had  not 
bound  his  principal.  In  such  cases  the  simple  The  test 
question  is,  whether  or  not  the  third  party  dealing  i^^estion, 
with  the  agent  had  a  right  to  mippose  that  the  agent  was 
dealing  within  the  scope  of  his  authority.  If  the  ordinary 
functions  of  an  agent  are  well  known,  a  secret  limitation  of 
those  functions  will  not  be  allowed  to  operate  to  invalidate 
his  act  done  in  excess  of  the  secret  limitation,  but  within  the 
ordinary  scope.  The  secret  limitation  can  take  effect  only 
when  notice  of  it  is  directly  brought  home  to  the  third  party. 
Any  other  rule  would  open  wide  the  door  to  endless  deceit 
and  false  dealing.^  As  a  general  principle,  this  is  sufficiently 
clear  ami  well  established.  But  in  the  case  of  banking  corpo- 
rations it  is  liable  to  confusion  from  the  uncertainty  attend- 
ant upon  the  knowledge  which  any  individual  has  of  the  real 
limits  of  the  ])owers  and  duties  of  any  particular  officer.  If 
a  statute  defined  accurately  the  acts  which  each  officer  should 
be  competent  to  perform,  this  difficulty  would  be  decreased. 
But  in  the  absence  of  such  enactments  every  board  of  direc- 
tors may  assume,  and  very  many  in  fact  do  assume,  to  define 
the  functions  of  the  respective  officers  according  to  their  own 
notions  of  propriety  in  such  matters.  Or  it  may  be  that  the 
board  will  conceive  it  preferable  to  attempt  no  such  definition, 
but  simply  to  appoint  one  person  to  be  "  cashier,"  another  to 
be  "  receiving  teller,"  another  to  be  "  paying  teller,"  and  so 
on  through  the  various  offices.  Now  in  either  of  these  cases 
it  is  natural,  indeed  it  is  necessary,  that  a  third  person  should 
suppose  that  these  various  officers  are  empowered  to  perform 
the  duties  which  the  ordinary  usage  and  method  in  the  trans- 
action of  banking  business  leave  in  the  hands  of  such  officers. 
Upon  this  supposition  it  is  practically  necessary  that  the  pub- 
lic should  act  in  dealings  with  the  bank.  Certainly  the  sup- 
position is  sufficiently  vague.  The  basis  of  usage  on  which  it 
rests  is  little  more  stable  than  a  quicksand.  It  is  not  uni- 
form in  different  cities,  often  not  in  different  institutions  in 

3  Mayall  v.  Boston  &  Maine  R.  R.  Co.,  19  N.  H.  122;  Farmers'  & 
Mechanics'  Bank  i:  Cliamplain  Transportation  Co.,  23  Vt.  186;  Clarke 
National  Bank  v.  Bank  of  Albion,  52  Barb.  592. 

VOL.  I.  13  193 


§98  OFFICERS   AND    AGENTS. — GENERAL   PRINCIPLES. 

the  same  city,  and  perhaps  is  not  permanent  in  the  same 
cities  or  institutions  throuuhout  a  lont^  course  of  years.  Still, 
a  small  nucleus  of  certainty  has  grown  by  degrees  into  exist- 
ence amid  the  great  uncertainty.  The  word  "cashier"  means 
something;  the  word  '■Mellcr"  means  something.  This  is 
shown  very  conclusively  by  the  frequency  with  which  directo- 
rial boards  content  themselves  with  simply  installing  a  person 
in  one  or  other  of  these  offices  without  any  effort  to  name  the 
appurtenant  duties,  but  assuming  by  unavoidable  implication 
that  of  course  there  is  a  certain  well-known  range  of  powers 
and  duties  as  naturally  and  necessarily  constituting  the  office, 
and  as  publicly  known  and  understood  to  do  so,  as  if  they 
should  be  embodied  in  a  written  vote.  Courts  have  many 
times  recognized  the  same  fact,  and  have  decided  that  presi- 
dent, directors,  cashier,  and  teller  have  or  have  not  either 
exclusive  or  concurrent  powers  to  do  acts  of  the  nature  desig- 
nated in  the  particular  case.  For  example,  the  power  to  dis- 
count is  exclusive  in  directors,  as  such.  The  power  to  draw 
checks  is  in  the  cashier  by  virtue  of  his  ofhce.  The  president 
qua  president  is  empowered  to  defend  suits  and  engage  counsel 
on  behalf  of  the  bank.  There  are  then  certain  classes  of  acts 
which  the  law  recognizes  as  properly  to  be  performed  by  certain 
officers.  These  classes  may  be  enlarged  by  future  decisions. 
The  only  absolute  limit  yet  established  is  when  judicial  dicta 
have  declared  some  special  power  not  to  be  inherent  in  some 
special  officer.  Starting  then  from  this  position,  that  there 
are  certain  powders,  only  a  portion  of  which  are  yet  known  by 
the  certain  knowledge  which  grows  out  of  a  judicial  ruling, 
which  l)elong  to  and  constitute  a  certain  oftico,  it  is  clearly 
reasonable  and  just  that  the  i)ublic,  and  any  individual  mem- 
ber thereof,  dealing  with  a  person  notoriously  filling  such  an 
ofhce,  should  have  the  right  to  presume,  in  the  absence  of 
express  notification  to  the  contrary,  that  such  person  has  such 
powers.  It  may  be  that  a  board  of  directors  could  by  vote 
declare  that  their  cashier  should  not  have  power  to  draw  a 
check.  But  if  they  still  allow  him  to  fill  the  office  of  cashier, 
as  to  all  third  parties  dealing  with  him  in  ignorance  of  this 
unusual  limitation,  he  must  still  be  allowed  to  bind  the  bank 
194 


INHERENT   AUTHORITY.  §  98 

by  the  exercise  of  this  customarily  inherent  authority.  Tliat 
he  has  exceeded  the  scope  of  his  agency  may  be  urged  by  the 
bank  against  him  personally,  and  may  be  an  abstract  truth ; 
but  it  is  one  which  public  policy  will  never  allow  the  bank  to 
set  up  against  the  claim  of  a  third  party  who  dealt  in  igno- 
rance of  this  peculiar  and  extraordinary  limitation.  If  there- 
fore the  corporation,  or  any  authority  within  and  on  behalf  of 
the  corporation,  undertake  to  set  strange  limits  to  the  powers 
which  it  will  allow  to  be  exercised  by  its  officers,  it  must  either 
refrain  from  giving  to  these  officers  the  titles  usually  regarded 
as  indicative  of  such  powers,  and  for  that  reason  equivalent 
to  a  general  holding  out  of  them  to  the  world  as  possessing 
such  powers,  or  it  must  bring  home  to  persons  dealing  with 
them  a  knowledge  of  the  limitations  it  has  seen  fit  to  draw 
round  the  offices.  Otherwise  the  corporation  will  be  bound 
by  acts  of  its  president  within  the  scope  of  the  ordinary  and 
legally  inherent  duties  and  powers  of  a  president;  by  acts 
of  its  cashier  within  the  scope  of  the  ordinary  and  legally 
inherent  duties  and  powers  of  a  cashier ;  and  so  on,  through 
the  whole  range  of  offices. 

(e)  Obviously  the  names  and  titles  by  Avhicli  the  various 
agents  are  denominated  are  intended  to  designate,  and  must 
be  presumed  to  designate,  the  nature  and  scope  of  An  official 
their  respective  agencies.     If  a  banking  corporation    notes  cer- 
gives  to  an  individual  a  title  which   in  ordinary   whk^Tir^ 
banking  parlance  is  attached  to  a  certain  range  of   on^otice'to 
powers  and  duties,  it  cannot  afterwards  be  heard   ti'e  contrary, 

bind  the 

to  say  that  the  secret  instructions  of  the  corporate  bank  as  to 
government,  or  the  peculiar  by-laws  adopted  by  it,  ties.  ^^'^ 
have  deprived  the  officer  of  these  powers  and  duties,  or  any 
of  them.  One  dealing  with  the  ofticer  of  a  bank,  within  the 
ordinary  and  legal  scoj^e  of  such  an  officer's  authority,  is  enti- 
tled in  justice  and  at  law  to  assume  as  against  the  bank  that 
the  officer  is  invested  with  this  customary  authority. 

Neitlicr  does  it  make  any  difference  in  this  respect  that 
the  charter,  or  the  statute  under  which  the  corporation  exists, 
gives  to  the  board  of  directors  power  to  settle  the  respective 
functions  of  the  subordinate  officers.     Our  National  Banking 

195 


§  98  OFFICERS    AND    AGENTS.  —  GENERAL    PRINCIPLES. 

Act^  empowers  \\\c  directors  to  "appoint  a  ])resi(lcnt,  vice- 
president,  cashier,  and  otlier  officers,  define  their  dutien,'^  &c. ; 
also  "to  define  and  reg'nlate  by  by-laws  .  .  .  the  manner  in 
■which  .  .  .  its  oflicers  [shall  be]  appointed,  its  property  trans- 
ferred, its  ,o-(Mieral  business  conducted,  and  all  the  privileti'cs 
granted  by  this  act  to  associations  organized  under  it  shall  be 
exercised  and  enjoyed."  Occasionally,  in  other  enactments, 
the  expression  "  to  define  and  limit "  duties  has  been  used. 
But,  after  all,  these  phrases  probably  give  to  the  directors  no 
power  over  their  officers  which  they  would  not  be  allowed  to 
exercise  by  virtue  of  their  common  law  authority.^  The  di- 
rectors are  the  government  of  the  bank,  and  must  have  power 
to  direct  and  control  the  acts  and  doings  of  the  other  and 
subordinate  agents.  But  whether  at  common  law  or  under 
such  statutory  enactments  they  seek  to  curtail  the  ordinary 
powers  of  any  of  their  officers,  their  action  in  so  doing  can 
only  be  valid  as  between  the  officer  and  the  bank.  If  the 
officer  does  what  they  have  expressly  forbidden  him  to  do, 
though  it  be  an  act  ordinarily  within  the  range  of  his  func- 
tions, he  will  be  liable  only  to  the  corporation  for  the  results 
of  his  disobedience.  The  directors  unquestionably  have  the 
power,  as  against  him,  to  "  define  "  his  duties  generally,  or  to 
"regulate"  or  "limit"  them  upon  any  particular  occasion, 
and  in  any  particular  matter.  They  may  also  have  the  same 
powder  as  towards  any  individuals  among  the  public,  or  even  as 
towards  the  entire  public.  But  it  is  an  absolutely  indispensa- 
ble preliminary  to  the  exercise  of  the  ])ower  in  this  direction 
that  the  individuals  or  the  public  should  receive  actual  notice 
of  the  fact. 

The  judicial  authorities  seem  fully  to  sustain  the  pro- 
pounded doctrine.  The  matter  is  one  of  sufficient  importance 
to  justify  the  quotation  of  the  more  conclusive  passages.  The 
New  York  Court  of  Appeals  says :  "  The  whole  tenor  of  au- 
thority is  in  favor  of  holding  corporations  for  the  acts  of  their 
officers,  especially  executive  officers  and  general  agents,  within 
the  general  sco})e  and  apparent  sphere  of  their  duties,  and  not 

4  Stat.  1863-61,  cliap.  106,  §  8. 

^  .Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

196 


INHERENT    AUTHORITY.  §  98 

holding  them  for  acts  done  without  special  authority  in  cases 
without  such  scope  and  general  sphere  of  duty.  The  cases 
are  all  reconcilable  and  sustainable  on  this  principle,  and  no 
other.  Courts  and  judges  have  spoken  cautiously  on  the  sub- 
ject, but  the  language  has  been  uniform,  limiting  the  responsi- 
bility of  corporations  for  the  acts  of  their  officers  and  agents, 
in  the  absence  of  an  express  authority  to  do  the  particular  act, 
to  those  performed  in  the  discharge  of  their  ordinary  duties  in 
the  usual  course  of  business,  and  within  the  sphere  and  scope 
of  such  duties.  Such  are  presumed  to  be  by  authority  of,  and 
within  the  knowledge  of,  the  directors ;  and  within  the  rule 
are  included  such  acts  as  are  shown  to  have  been  performed 
with  the  knowledge  and  implied  consent  of  the  directors, 
although  out  of  the  line  of  ordinary  duty  and  usual  course  of 
business.  ...  It  must  be  assumed,  therefore,  and  the  public 
and  those  dealing  or  having  business  transactions  with  the 
bank  had  the  right  to  assume,  that  they  [the  officers  of  the 
bank]  had  and  exercised  the  powers  and  performed  the  duties 
usually  devolved  upon  and  performed  by  persons  occupying 
the  same  positions  in  other  banks,  and  such  as  they  were  in 
the  habit  of  performing  in  the  transaction  of  the  current 
and  ordinary  business  of  the  bank;  and  within  this  limit  the 
corporation  would  be  bound  by  their  acts,  in  the  absence  of 
proof  that  their  powers  were  limited  or  restricted,  and  that 
such  restriction  or  limitation  was  known  to  the  persons  deal- 
ing with  them.  Whatever  may  be  the  extraordinary  or  inci- 
dental powers  of  the  corporation  under  its  charter,  power  to 
bind  the  corporation  can  only  be  presumed  to  exist  in  its 
executive  agents  and  officers  within  the  scope  of  its  ordinary 
business  and  their  ordinary  duties."  ^  In  Minor  v.  Mechanics' 
Bank  of  Alexandria,''  the  court  say :  "  Officers  of  a  bank,  as 
of  any  other  corporation,  are  held  out  to  the  public  as  having 
authority  to  act  according  to  the  general  usage,  practice,  and 
course  of  their  business.  Their  acts  within  the  scope  of  such 
authority  will  generally  bind  the  bank  in  favor  of  third  per- 
sons possessing  no  other  knowledge."     In  The  Bank  of  Yer- 

*  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278. 
'  1  Pet.  46. 

197 


§  98  OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

gennes  v.  Warren,^  discussing  the  legality  of  an  act,  which  the 
court  held  to  fall  within  the  scope  of  the  cashier's  power, 
^Mrt  "  cashier,"  the  judge  said,  "  Indeed  1  think  it  would  not 
defeat  the  purchase  if  it  could  be  shown  that  the  cashier  had 
been  forljidden  by  the  principals  to  transact  such  business." 
In  Conmiercial  IJank  of  Buffalo  v.  Kortright,^  the  court  ap- 
plies to  banks  and  their  officers  the  general  rule  of  agency,  as 
laid  down  in  Story  on  Agency,  §§  127,  133,  that  the  principal 
is  bound  by  acts  which  he  holds  out  his  agent  as  competent 
to  perforin,  despite  that  they  may  contravene  secret  instruc- 
tions or  orders.  Unquestionably  any  person  invested  with  the 
familiar  title  of  an  official  position  in  a  bank  is  held  out  to 
the  jaiblic  as  competent  to  perform  all  the  usual  and  inherent 
or  essential  functions  of  the  office.  In  Wild  v.  Bank  of  Passa- 
raaquoddy/*^  it  was  said,  that  any  bank  choosing  to  restrict  the 
ordinary  scope  of  its  cashier's  authority  is  at  perfect  liberty  to 
do  so ;  but  that,  in  such  case,  it  is  incumbent  on  the  bank  to 
show,  not  only  the  fact  that  it  has  imposed  a  certain  restric- 
tion, but,  further,  that  the  imposition  of  this  restriction,  being 
of  a  peculiar  and  unwonted  kind,  is  hiown  to  those  with  whom 
it  is  in  the  habit  of  doing  business.  In  Franklin  Bank  v. 
Steward,"  it  was  said  that  the  cashier's  "true  position  appears 
to  be  that  of  a  general  agent  for  the  performance  of  his  offi- 
cial and  accustomed  duties.  While  acting  within  the  scope 
of  this  authority,  he  would  bind  the  bank,  although  he  might 
violate  his  private  instructions." 

(/)  The  case  of  Lloyd  v.  West  Branch  Bank  ^  is  perhaps 
even  stronger  than  any  of  the  others.  For  though  the  judge 
.  , .     .  ,      in  that  cause  is  considering,  not  the  case  of  a  cir- 

Act  in  viola-  o' 

tion  of  char-    cumscribiug  vote  of  a  directorial    board,  but  the 

ter  niav  bind  i      •        i ,-    i        i 

the  baiik.  actual  charter  of  the  bank  itself,  he  docs  not  hesi- 
p/m,§§89a,  tatc  to  apply  the  same  principle.  The  decision  is 
^   ■  rather  striking  by  reason  of  the  vigor  and  oddity  of 

its  expression,  but  it  is  certainly  sound.  It  is,  briefly,  to  the 
effect  that  recognized  and  known  functionaries,  especially  the 
officers  of  a  bank,  are  held  out  to  the  ivorld  as  having  authority/ 

8  7  Hill,  91.  »  22  Wend.  348.  ^^  3  Mason,  505. 

"  37  Me.  519.  ^-  15  Peun.  St.  172. 

198 


INHERENT    AUTHORITY.  §  98 

to  act  according  to  the  general  usage,  practice,  and  custom  of 
the  business  in  such  institutions.  Otherwise  there  could  be 
no  safety  for  the  public  in  doing  business  with  them.  Their 
charters  differ  In  some  respects,  and  individuals  cannot  be 
presumed  to  '•  carry  these  documents  in  their  pockets  as  a  vade 
mecumP  The  acts  of  oflicers,  therefore,  in  the  scojje  of  such 
general  usage,  practice,  and  course  of  business,  bind  the  cor- 
poration in  favor  of  third  persons  who  did  not  know  at  the 
time  that  the  officer  was  exceeding  the  course  of  his  authority. 
In  the  Commercial  Mutual  Marine  Ins.  Co.  v.  Union  Mutual 
Ins.  Co.,^2  —  which,  though  not  a  bank  case,  yet  covers  the 
point  now  in  discussion  with  great  thoroughness  and  accu- 
racy, —  a  contract  made  by  the  president  in  contravention  of 
secret  limitations  was  upheld.  The  court  declared  that,  in 
order  to  show  that  the  corporation  held  out  their  officer  as 
competent  to  make  such  a  contract,  it  was  sufficient  evidence 
to  show  a  usage  among  such  companies  to  make  such  contracts 
through  such  officer.  In  Neiffer  v.  Bank  of  Knoxville,^^  a  con- 
tract, made  not  in  accordance  with  the  provisions  of  the  char- 
ter, was  nevertheless  upheld  on  the  ground  that  customarily 
such  a  contract  could  have  been  made  by  the  officer  who  had 
in  this  case  irregularly  undertaken  to  make  it;  and  that  there- 
fore it  should  be  enforced  in  favor  of  the  third  party  who  had 
entered  into  it  in  good  faith  and  in  ignorance  of  the  charter 
restriction.     But  see  pp.  202,  208,  and  §  722. 

The  cases,  it  will  be  observed,  relate  especially  to  the  acts 
of  cashiers,  —  a  circumstance  fully  explained  by  the  fact  that 
the  cashier  is  the  chief  executive  officer,  and  that  naturally  his 
acts  are  more  often  the  subject  of  controversy  than  those  of 
other  officials.  But  the  general  principle  which  runs  through 
the  decisions  is  equally  applicable  to  a  president,  teller,  or 
other  agent  wdiomsoever. 

((/)  None  of  the  above  cases  deny  or  infringe  the  statu- 
tory right  of  defining,  restricting,  or  limiting  official   ^j^^  ^^^^ 
powers.     On  the  contrary,  nearly  all  of  them  in   may  restrict 

*■  f,  f""  enlarge 

terms  distinctly  recognize  the  power  of  the  directo-  officer's 
rial  board,  or  the  government  of  the  corporation, 
13  19  How.  318.  1*  1  Head,  162. 

199 


§  98  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

to  prescribe,  cither  with  the  effect  of  enlargement  or  circum- 
scription, the  functions  of  any  officer.  They  only  superadd  to 
this  right  (making  no  distinction,  as  we  have  above  pointed 
out,  whether  it  owes  its  existence  to  common  law,  charter,  or 
general  statute)  the  duty  of  bringing  home  knowledge  of  their 
action  to  the  individual  dealing  with  the  officer,  whenever, 
in  the  absence  of  such  knowledge,  he  would  naturally  be  de- 
ceived and  injured  by  relying  simply  upon  the  usual  course 
and  usage  of  banking  business.  Since  the  power  to  define  and 
limit  does  exist,  it  must  be  supposed  to  have  some  value,  and 
the  language  of  the  statute  must  be  allowed  to  describe  some 
substantial  privilege.  The  power  is  indeed  valuable,  and  the 
privilege  substantial,  and  no  definite  limit  can  be  set  to  either, 
provided  only  that  the  one  requisition  is  complied  with  of  giv- 
ing due  and  sufficient  notice  of  its  exercise  in  any  instance. 
It  must  then  necessarily  affect  and  bind  the  party  notified. 

(/t)  Two  English  cases  well  illustrate  this  rule.  A  cashier 
indorsed  negotiable  paper,  which  ordinarily  he  would  have 
If  c  has  no-  ^^^^  cmpowcrcd  to  do  by  the  inherent  authority  of 
tice  the  ayent  \^[q  office.    But  he  preceded  this  indorsement  by  the 

is  not  acting  ,,       tt  •       <•      i         i^'  i 

■within  his  ill-  words  "joer  proc.  He  was  m  tact  acting  under  a 
ifTe'Ts^pTtTc!  peculiar  and  special  authority,  distinct  from  that 
his  inquiry.  Qj.jjj^arily  vcstcd  in  him  by  his  office ;  and  these 
words  were  intended  to  notify  the  dealer  of  this  circumstance, 
and  were  words  customarily  having  this  warning  or  admoni- 
tory significance.  The  court  held  that  the  notice  that  the 
authority  was  special  and  peculiar,  and  therefore  wholly  dis- 
tinct from  that  appurtenant  to  the  cashier  as  such,  was  suffi- 
cient.^^ In  fact,  the  cashier,  though  doing  an  ordinary  act,  was 
not  doing  it  under  his  general  official  authority,  but  under  an 
independent  and  unwonted  delegation  of  power.  The  words 
prefixed  were,  by  their  well-known  meaning,  equivalent  to  a 
direct  statement  to  this  effect  to  the  dealer,  who  was  then  and 
thereby  put  upon  his  inquiry  if  he  wished  to  ascertain  pre- 
cisely the  nature  and  extent  of  the  special  authority.  If  he 
did  not  care  to  be  at  the  pains  of  satisfying  himself  on  this 

15  Alexander  v.  Mackenzie,  0  C.  B.  7GG;  Stagg  v.  Elliott,  12  C.  B.  n.  s. 
37;i;  s.  c.  31  L.  J.  C.  P.  L'UU. 
200 


INHERENT   AUTHORITY.  §  98 

point,  but  relied  on  his  opinion  of  the  cashier's  character,  or 
simply  yielded  to  indolence  or  carelessness,  any  resulting  loss 
must  properly  fall  wholly  on  him.  He  had  received  a  full 
and  sufficient  warning  that  the  cashier  was  not  in  this  matter 
authorized  to  deal  with  him  by  virtue  and  in  the  exercise  of 
his  customary  official  authority,  and  he  could  not  afterward 
be  allowed  to  appeal  to  that  customary  official  authority  to 
support  the  regularity  and  validity  of  an  act  which  he  was 
distinctly  notified  at  the  time  was  not  done  under  it. 

('/)  The  authority  implied  from  a  public  holding  out,  tacit 
acquiescence,  or  usage  and  ordinary  course  of  dealing,  can 
never  go  beyond  the  power  which  the  bank  could  legally  confer 
on  the  officer  under  the  circumstances  of  wJiich  C.  has  notice  ; 
i.  e.  if,  as  a  matter  of  law  on  the  facts  within  C.'s  reasonable 
reach,  the  act  is  one  for  which  previous  authority  could  not 
have  been  given  by  that  power  whose  conduct  is  the  basis  of 
inference  in  the  matter,  then  C.  has  no  right  to  infer  authority 
from  the  facts  named.  They  only  suffice  to  confer  upon  the 
officer  jnst  as  much  authority  in  the  premises  as  he  could  have 
derived  from  an  empowering  resolution  of  the  board  of  direc- 
tors, or  of  the  corporate  body.  Whatever  limitation  there  is, 
if  any,  upon  the  functions  which  the  government  of  the  corpo- 
ration can  by  their  direct  vote  enable  him  to  assume,  that  same 
limitation  equally  curtails  the  functions  which  usage,  acquies- 
cence, or  public  holding  out  will  enable  him  legally  to  exercise 
on  behalf  of  the  bank.  If  any  official  undertakes  to  exercise 
any  authority  with  Avhich  the  corporate  government  have  no 
legal  right  to  invest  him,  he  does  not  in  its  exercise  bind  or 
affect  the  bank,  no  matter  how  old,  how  well  known,  or  how 
frequent  has  been  the  previous  practice. 

Yet  it  must  be  kept  in  mind  that  though  executory  contracts 
beyond  authority  will  not  be  enforced,  yet,  if  partly  executed, 
they  may  be.     (See  First,  above.) 

In  Minor  v.  Mechanics'  Bank  of  Alexandria,!^  it  was  said 
that  the  power  by  implication  would  be  held  good,  provided  it 
were  one  which  could  be  conferred  by  a  written  vote  of  the 
board   of   directors.     Circumstances   may  be    shown,  among 

16  1  Pet.  46. 

201 


§  08  OFFICERS   AND    AGENTS.  —  GENERAL    PRINCIPLES. 

which  arc  especially  usage  and  holding  out,  which  dispense 
with  proof  of  the  vote,  and  either  estop  the  corporation  to 
deny  it  or  make  its  supposed  existence  a  conclusive  presump- 
tion of  law.  But  this  does  not  affect  the  imperative  requisition 
that  such  a  vote,  if  it  ever  had  been  passed,  should  have  been 
legal  and  valid,  and  within  the  powers  of  the  board.  Hhice 
no  one  can  allege  ignorance  of  the  law,  persons  dealing  with 
the  bank  are  held  to  know  those  limits  which  surround  the 
possible  powers  of  each  particular  oHicer,  and  which  can  be 
extended  by  no  process  whatsoever,  be  it  by  the  most  perfect 
of  usages  or  by  the  most  formal  of  votes.  If  one  deals  with 
an  officer  beyond  these  described  limits,  there  is  nothing 
which  he  can  prove  which  will  protect  him.  If  it  is  matter 
of  law  that  a  certain  function  or  act  falls  exclusively  or  inalien- 
ably within  the  range  of  the  powers  and  duties  of  one  officer, 
no  state  of  affairs  can  cause  the  performance  of  that  function 
or  act  by  another  officer  to  affect  or  bind  the  bank.  There 
are  such  exclusive  and  inalienable  functions  in  the  various 
officers,  as  will  be  seen  hereafter ;  and  it  behooves  the  public 
to  become  acquainted  with  them,  since  usurpation  by  bank 
officers  of  each  other's  functions,  though  often  innocently 
done  through  ignorance  and  mistake,  is  not  uncommon,  and 
frequently,  by  force  of  the  above  doctrine,  works  a  mischief 
to  the  customer  which  the  law  is  impotent  to  cure.  The  case 
of  the  Farmers  and  Mechanics'  Bank  v.  Butchers  and  Drovers' 
Bank  ^"  furnishes  a  good  example  in  this  matter.  Selden,  J., 
delivering  the  opinion,  said  that,  though  a  custom  for  a  cashier 
or  a  teller  to  certify  a  check  might  be  perfectly  good,  yet  it 
was  subject  to  the  limitation  that  it  could  only  be  good  where 
the  drawer  had  funds  in  the  bank.  In  the  case  under  con- 
sideration the  drawer  had  not  funds,  and  the  holder  was  aware 
that  he  had  not.  The  legal  limitation  of  the  power  of  certi- 
fying, which  rendered  certification  under  these  circumstances 
invalid,  was  a  rule  of  law  of  which  the  holder  of  the  check 
could  not  be  heard  to  declare  himself  ignorant.  It  was  an 
absolute  rule  of  law,  and  the  holder  must  be  held  to  know  that 

"  IG  N.  Y.  125.     To  the  same  effect  is  Mussey  v.  Eagle  Bank,  9  Met. 
306.    See  also  Salem  Bank  v.  Gloucester  Bank,  17  Mass.  1. 
202 


AUTHORITY   OP   OFFICER.  §  98 

it  was  such,  and  that  iiothinj^  could  dispense  with  its  operation. 
Knowing  the  fact  of  the  deficiency  of  the  drawer's  assets,  which 
brought  that  principle  of  law  into  operation,  he  ought  also  to 
have  known  that  as  an  unavoidable  consequence  the  certifying 
oOicer  was  exceeding  the  possible  limits  of  his  authority.  The 
loss,  therefore,  must  rest  upon  him  for  having  accepted  a  cer- 
tification which  the  law  would  conclusively  presume  that  he 
knew  to  be  invalid. 

(/)  An  interesting  case  on  the  subject  of  authority  has 
been  decided  in  the  Court  of  A})peals  of  New  York.  It  has 
been  laid  down  that  an  officer  may  conclude  the  bank  by  au 
act  obviously  pertaining,  by  strict  right,  to  quite  a  different 
functionary.  A  customer  of  the  bank,  having  overdrawn  his 
bank  account,  went  to  the  bank  and  paid  in  somewhat  more 
than  enough  to  cover  the  deficiency,  handing  the  money  over 
the  counter  to  the  paying  teller.  The  court  held  that  this 
constituted  a  suflficient  payment  to  the  bank.  It  did  not  ap- 
pear whether  or  not  the  receiving  teller  was  in  the  bank  at 
the  time,  and  it  did  appear  that  an  entry  to  the  credit  of  the 
customer  was  made  on  the  books  of  the  bank  for  the  amount 
paid  in  to  the  paying  teller.  But  these  facts  do  not  seem  to 
have  been  regarded  as  indispensable  for  furnishing  a  founda- 
tion for  the  decision  of  the  court.  The  breadth  of  the  ruling 
will  appear  from  this  quotation :  "  When  one  goes  into  a  bank 
and  finds  behind  the  counter  one  of  its  officers  employed  in  its 
business,  and  upon  his  demand  pays  a  debt  due  the  bank  in 
good  faith,  without  any  knowledge  that  the  officer's  authority 
is  so  limited  that  he  has  no  right  to  receive  it,  he  must  be 
protected,  and  the  bank  must  be  bound  by  the  payment."  If 
one  were  inclined  to  question  or  criticise  this  dictum,  it  might 
be  fair  to  say  that  a  person  who  undertakes  to  pay  his  debt  to 
the  bank  to  a  person  whom  he  knows  to  be  the  "  paying  "  teller 
cannot  be  said  to  make  his  payment  "  without  any  knowl- 
edge that  the  officer's  authority  is  so  limited  that  he  has  no 
right  to  receive  it "  ;  —  more  especially  since  in  this  case  the 
customer  knew  not  only  that  there  was  a  cashier,  but  also  that 
there  was  a  receiving  teller.  The  paying  teller  had  written 
to  the  customer  on  the  matter  of  the  overdraft,  asking  him  to 

203 


§  98  OFFICERS    AND    AGENTS,  —  GENERAL   PRINCIPLES. 

adjust  the  overpayment,  and  as  there  was  no  evidence  that 
the  receiving  teller  was  present,  but  it  was  shown  that  in  his 
absence  the  other  officers  acted  in  his  place,  it  may  be  pre- 
sumed that  together  with  the  presumption  of  regularity  these 
facts  made  out  a  case  of  substitution  in  the  mind  of  the  court, 
and  at  any  rate  the  ruling  must  be  confined  to  tlie  facts. 

It  is  in  general  held  that,  when  C.  pays  money  to  an  officer 
to  whom  its  reception  does  not  belong,  such  officer  is  the 
agent  of  C.  to  bring  the  money  to  the  possession  of  the  bank 
by  delivery  to  the  proper  officer.'® 

Ui)on  the  same  principle,  it  has  also  been  held  that  to  make 
a  subscriber's  payment  of  his  subscription  money  for  capital 
stock  a  sufficient  payment  and  binding  upon  the  bank,  it  must 
have  been  made  to  an  officer  authorized  to  receive  it.^^  So 
where  the  bank  has  a  receiving  teller,  whose  proper  province 
it  is  to  receive  deposits,  the  bank  is  not  liable  to  reimburse  a 
depositor  who  has  handed  in  his  funds  to  the  book-keeper,  if 
it  happens  that,  after  their  receipt  by  that  improper  and  unau- 
thorized officer,  they  are  lost  or  embezzled  before  they  come  to 
the  hands  and  possession  of  some  one  whose  special  function 
it  is  to  receive  or  to  keep  them.^'^  On  the  other  hand,  the  bank 
has  been  held  liable  to  reimburse  in  a  case  where  its  manager 
had  succeeded  in  obtaining  and  misappropriating  the  money 
of  a  customer,  inasmuch  as  in  the  conduct  of  the  transaction 
the  officer  had  done  no  act  which  was  not  strictly  within  the 
scope  of  his  legal  functions,  and  had  induced  the  customer  to 
believe  that  he  was  acting  simply  in  the  regular  and  ordinary 
course  of  the  business  of  the  banking-house.^^  We  see,  there- 
fore, that,  in  general,  no  act  binds  the  bank  unless  done  by 
the  officer  actually  empowered,  or  whom  the  customer  has  a 
right  to  believe  empowered,  to  do  it ;  and  that  every  act  done 

"  East  River  National  Bank  v.  Gove,  57  N.  Y.  597;  Manhattan  Co.  v. 
Lydig,  4  Johns.  377. 

19  State  V.  Commercial  Bank,  6  Sm.  &  :M.  218. 

20  Manhattan  Co.  v.  Lydig,  4  Johns.  377;  Thatcher  v.  Bank  of  State 
of  New  York,  5  Sandf.  121.  Though  a  later  case  seems,  in  spite  of  the 
effort  of  the  court  to  draw  a  distinction,  to  establish  a  contrary  rule: 
East  River  National  Bank  v.  Gove,  57  N.  Y.  597. 

*^i  Thompson  v.  Bell,  20  Eng.  L.  &  Eq.  536. 
204 


AUTHORITY    OF   OFFICER.  §  98 

by  an  officer  witliin  this  scope  will  bind  the  bank.  The  rule 
will  hold  good  even  though  the  act  is  in  fact  fi-audulcnt, 
provided  the  customer  lias  no  knowledge  of  the  fraud,  but  is 
himself  dealing  hona  fide,  and  believes  the  official  to  be  deal- 
ing in  the  like  good  faith  in  the  business  of  his  principals. 

(^)  If  an  officer  is  acting,  speaking,  or  receiving  infor- 
mation in  matters  which  the  ordinary  usage  of  the  banking 
business  casts  within  the  range  of  his  functions,  the  Representa- 
bank  is  bound  and  affected  thereby,  as  any  other  Notice. 
principal,  by  the  act,  declaration,  or  knowledge  of  the  agent.22 
No  corporate  vote  is  necessary  to  give  validity  to  a  contract 
made  by  an  agent  in  a  matter  concerning  which  he  has,  from 
any  source,  the  power  to  contract.-^  But  no  officer  can  bind 
or  affect  the  bank  by  any  dealing  in  the  department  allotted 
to  another  officer.  The  bank,  in  appointing  various  officers, 
is  simply  creating  various  perfectly  distinct  and  independent 
agencies.  Each  agent  can  act  only  in  his  own  agency.  In 
like  manner,  demand  or  notice  can  affect  the  bank  only  if  it 
be  made  upon  or  given  to  the  officer  having  charge  of  the 
subject  matter  which  the  notice  concerns.  If  it  be  given  to 
one  within  whose  sphere  the  business  in  question  does  not 
fall,  the  bank  is  not  chargeable  with  it ;  neither  is  it  answera- 
ble for  negligence  if  it  fails  to  act  upon  it.^*  For  example,  the 
book-keeper  of  a  bank  has  nothing  to  do  with  its  litigation, 
and  notices  in  a  lawsuit  served  upon  him  would  not  ordinarily 
be  valid  as  notices  served  upon  the  corporation.  So  it  has 
been  held,  that  knowledge  on  the  part  of  a  clerk  in  a  bank  of 
the  residence  of  an  indorser  on  a  note  would  not  prevent  the 
holder  of  the  note  from  asserting  and  availing  himself  of  the 
ignorance  of  this  fact  on  the  part  of  those  officers  of  the  bank 
having  charge  of  this  department.     Their  ignorance  was  the 

22  Wyman  v.  Hallowell  &  Augusta  Bank,  14  Mass.  58 ;  Salem  Bank  v. 
Gloucester  Bank,  17  id.  1 ;  Hartford  Bank  v.  Hart,  3  Day,  491 ;  Hooker 
V.  Eagle  Bank,  30  N.  Y.  S3;  New  Hampshire  Savings  Bank  v.  Downing, 
16  N.  H.  187. 

23  Eastman  v.  Coos  Bank,  1  N.  H.  23;  Lime  Rock  Bank  v.  Macomber, 
29  Me.  564. 

24  Goodloe  r.  Godley,  13  S.  &M.  233;  Commercial  Bank  of  Manchester 
V.  Bonner,  id.  649. 

205 


§  98  OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

ignorance  of  the  corporation;  l)ut  the  knowledge  of  the  clerk 
was  nut  the  knowledge  of  the  corporation.-^ 

(/)  A  very  sini))le  and  nnqnestional)le  method  of  hold- 
ing out  is  In-  allowing  an  ofhccr  repeatedly  to  perform  any 
iioidinpout  specific  act,  and  recognizing  his  performance  as 
whilouu.i)-  pi't>pcr  and  valid.  Long  usage  implies  authority 
jcctioii.  equally  with  an  express  resolution.^*^     It  has  been 

said  that  a  corporation  is  not  bound  by  an  act  of  its  agent 
simjily  because  it  has  been  his  previous  practice  to  do  similar 
acts,  unless  knowledge  of  this  previous  practice  is  brought 
home  to  the  corporate  government.'''^  As  a  broad  statement 
in  technical  terms  of  a  legal  doctrine,  this  is  unobjectionable 
enough.  But  it  should  be  understood  that  the  knowledge  may 
be  such  as  arises  or  is  implied  by  imperative  implication  of 
law,  as  well  as  knowledge  which  exists  in  fact.  The  directo- 
rial board  of  a  bank,  which  is  its  corporate  government,  and 
which  for  most  legal  considerations  is  in  fact  the  corporation 
itself,  is  obliged  to  meet  frequently,  and  to  keep  a  close  and 
constant  supervision  over  the  daily  course  and  conduct  of  its 
business.  In  many  species  of  corporations  the  position  of 
director  is  almost  a  sinecure  ;  the  board  constitutes  only  a 
sort  of  advisory  body,  which  may  meet  only  on  comparatively 
infrequent  occasions,  to  discuss  large  and  important  ques- 
tions concerning  the  general  business  policy  of  the  corporation. 
r>ut  it  is  not  thus  with  banks.  Their  directors  are  bound  to 
constant  activity  and  thorough  acquaintance  with  the  daily 
course  of  the  affairs  and  dealings  of  the  institution.  It  is  their 
duty  to  make  this  acquaintance  so  thorough  that  no  officer 
can  continue  long  and  consistently  to  usurp  a  function  of  any 
degree  of  importance  whatsoever  without  their  knowledge. 
Uncpiestionably  the  public  has  a  right  to  suppose  that  this 
board,  which  probably  meets  once  or  oftener  in  a  week  with 

26  (Joodloe  V.  Godley,  13  S.  &  M.  233. 

26  Iloytv.  Thompson,  1  Selden,  320;  Elwell  v.  Dodge,  33  Barb.  336; 
Lloyd  V.  West  Branch  Bank,  15  Penn.  St.  172;  Lohman  v.  N.  Y.  &  Erie 
R.  k.  Co.,  2  Sandf.  39;  Nortliern  Central  Railway  Co.  v.  Bastian,  15  Md. 
404;  Dougherty  v.  Hunter,  51  Penn.  St.  380. 

27  Lawrence  v.  Gebhard,  41  Barb.  575. 

206 


AUTHORITY   INFERRED    FROM    APPARENT    ACQUIESCENCE.      §  98 

the  express  duty  of  inquiring  into  the  proceedings  of  the  very 
few  days  which  have  intervened  since  the  Last  convention,  has 
an  ordinarily  accurate  knowledge  of  how  those  proceedings 
are  usually  and  uniformly  conducted.  This  is  an  ol)vious  duty 
of  the  board,  and  therefore  strictly  of  the  corporation  ;  for  the 
board  is,  in  the  eye  of  the  law,  the  corporation.  The  commu- 
nity are  entitled  to  assume  that  the  board  or  corporation  do 
their  duty,  and  can  hold  the  corporation  liable  for  the  results 
of  their  neglecting  it.  So  if  a  board  of  bank  directors  suffer 
the  assumption  of  a  certain  function  by  their  cashier  or  teller 
to  grow  into  a  usage,  it  is  not  to  be  conceived  that  they  could 
be  heard  to  say  that  they  had  never  had  any  knowledge  of  his 
conduct,  and  so  shift  the  mischief  of  their  own  default  upon 
the  shoulders  of  an  innocent  third  person.  In  other  words, 
instead  of  its  being  necessary  that  the  practice  of  tlie  officer 
should  have  been  brought  to  the  actual  knowledge  of  the  gov- 
ernment, it  must  suffice  to  show  that  such  practice  has  con- 
tinued so  long  and  has  been  so  public  that  it  must  have  been 
brought  to  the  knowledge  of  the  government  had  not  that 
body  been  unduly  lax  and  careless  in  the  performance  of  its 
duties.^^  A  board  of  bank  directors,  with  responsibilities  so 
much  greater  and  duties  so  much  more  exacting  than  fall  to 
the  lot  of  directors  in  the  majority  of  other  species  of  corpo- 
rations, must  be  very  quickly  estopped  to  deny  their  knowledge 
of  any  practice  which  grows  up  among  their  subordinates.  In 
Minor  v.  Mechanics'  Bank  of  Alexandria,^^  it  was  said  that  it 
is  a  presumption  of  law  that  the  ordinary  usage  and  practice 
of  a  bank,  "  in  the  absence  of  counter  proof,"  results  from 
regulations  of  the  directors.  What  "  counter  proof  "  would 
be  regarded  as  sufficient,  or  what  species  of  evidence  would  be 
admissible  as  going  to  constitute  "  counter  proof,"  is  not  inti- 
mated. But  it  would  seem  that  law  and  justice  would  equally 
require  that  only  evidence  going  to  show  that  such  was  not  in 
fact  the  ordinary  usage  and  practice  of  the  bank,  or  that  the 
circumstances  attendant  upon  it  were  not  such  as  to  give  the 

28  Beers  v.  Phoenix  Glass  Co.,  14  Barb.  358;  Smith  v.  Hull  Glass  Co., 
11  C.  B.  897;  9  Eng.  L.  &  Eq.  442. 
2«  1  Pet.  46. 

207 


§  98  OFFICERS    AND    AGENTS.  —  GENERAL    PRINCIPLES. 

public  or  the  individual  a  conclusive  right  to  regard  such 
usage  and  practice  as  being  established  and  binding,  should 
be  allowed.  To  allow  the  bank  to  show  more  than  this,  by 
way  of  "  counter  proof,"  would  in  effect  be  to  enable  them  to 
make  otliers  suffer  for  their  fault.  The  "  interests  of  the 
mercantile  world  "  should  be  imperative  in  this  matter.^*^ 

AN'hcre  one  deals  with  a  corporation  in  good  faith,  and  the 
transaction  is  not  ultra  viren^  and  he  is  unaware  of  any  defect 
or  irregularity  on  the  part  of  those  acting  for  the  corporation, 
and  there  is  nothing  to  excite  suspicion  of  such,  the  corpora- 
tion is  bound,  although  such  defect  or  irregularity  really  exists. 
Habitual  exercise  of  powers  by  an  officer  with  the  knowl- 
edge and  acquiescence  of  the  bank  defines  as  to  the  public  his 
authority,  if  it  is  such  as  the  directors  could  confer  without 
violating  the  charter.^i  So  far  as  the  public  are  concerned,  it 
is  immaterial  that  such  powers  are  contrary  to  a  by-law.^^ 

Where  a  bank  president,  by  fraud  and  collusion  between 
himself  and  the  payee  of  a  draft  drawn  on  the  bank,  raised 
money  dishonestly  upon  the  draft  by  the  wrongful  use  of  liis 
official  powers,  it  was  held  that  a  bona  fide  indorsee  for  value 
of  the  ])aper  miglit  recover  thereon  from  the  bank.^^  So  if 
negotiable  paper  be  indoi-sed  for  accommodation  solely,  it  is 
irregular,  and  even  illegal ;  and  is  of  course  an  unauthorized 
and  wrongful  act  on  the  part  of  the  officer  doing  it.  Yet  if 
the  indorsement  of  the  negotiable  paper  of  the  bank  is  the 
proper  function  of  this  officer,  the  bank  will  be  bound  to  the 
holder  of  this  wrongfully  indorsed  paper,  provided  he  came 
by  it  in  due  course  of  business,  and  without  notice  of  the  fact 
that  the  indorsement  was  for  accommodation.^*  Though,  by 
the  principle  already  laid  down,  holding  the  taker  to  knowl- 
edge of  the  law  provided  he  has  knowledge  of  the  facts,  if  he 
had  been  aware  tluit  it  was  solely  an  accommodation  indorse- 
so  Andrews  v.  Kiieeland,  6  Covven,  .351. 

81  Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

82  Royal  Bank  o.  Farquand,  G  Ellis  &  Black,  327;  Agar  i>.  Atlantic  Ins. 
Co.,  3  C.  B.  X.  s.  72."j. 

83  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  256. 

8*  Mechanics'  Banking  Association  v.  N.  Y.  &  Saugerties  Lead  Co.,  23 
IIow.  Pr.  74 ;  Bank  of  Genesee  i;.  Patchin  Bank,  3  Kern.  309. 
208 


INFERRED    AUTHORITY.  §  98 

ment  lie  could  not  have  recovered  on  the  ground  that  he  did 
not  know  but  that  the  officer  might  be  authorized  to  make 
such.  The  absolute  and  necessary  illegality,  the  impossibility 
of  its  being  legal,  except  perhaps  by  virtue  of  special  legisla- 
tion, which  no  one  can  assume,  is  a  principle  of  law  which 
everybody  is  imperatively  presumed  to  know.  In  this  case 
none  of  the  reasons  given  sometimes  for  holding  parties  to 
ulti'a  vires  acts  exist. 

(m)  So  with  the  ordinary  statutory  requisition  that  all  for- 
mal contracts  of  the  bank  shall  be  signed  by  the  president  and 
cashier.  The  contracts  must  be  first  made  by  the  signing  con- 
directors,  for  power  to  sign  is  not  power  to  make,  t''^^^^^- 
and  then  only  does  the  function  of  the  president  and  cashier 
come  in.  They  are  authorized  to  sign  contracts  which  have 
been  thus  previously  entered  into,  but  they  are  authorized  to 
sign  none  others  ;  for  none  others  are  in  fact  contracts  of  the 
bank.  So,  if  they  do  sign  others,  it  is  an  unauthorized  exer- 
cise of  a  power  or  duty,  which  yet  properly  inheres  in  them. 
But  it  has  been  strongly  intimated  that  their  signatures 
should  be  regarded  as  conclusive  of  the  validity  of  a  contract, 
in  favor  of  third  parties  affected  thereby  and  ignorant  of  the 
irregularity  lying  behind  this  procedure,  which,  though  irreg- 
ular, has  yet  been  done  prima  facie  in  strict  pursuance  of  an 
existent  function.^ 

(w)  If  the  officer  or  agent  of  a  corporation  is  clothed  with 
a  certain  power,  either  by  charter,  statute,  or  by  the  lawful 
act  of  the  corporation,  and  if  he  uses  that  power  for  an  un- 
authorized or  even  prohibited  purpose,  or  fraudulently,  yet  the 
corporation  will  be  answerable  for  his  action  to  any  innocent 
third  person  affected  thereby .^"^  Ordinarily,  whenever  the  act 
is  one  not  upon  its  face  illegal,  or  in  excess  either  of  the 
general  corporate  powers,  or  of  the  powers  which  the  officer 
undertaking    it    may    legally    exercise,  and   is   held   out   as 

85  Gillett  V.  Campbell,  1  Den.  520. 

86  Sheehan  v.  Davis,  17  Ohio  St.  571 ;  Madison  &  Indianapolis  R.  R. 
Co.  V.  Norwich  Saving  Soc.,24  Ind.  457;  Barnes  v.  Ontario  Bank,  19  N.  Y. 
152;  Curtis  v.  Leavitt,  15  id.  9;  Leavitt  y.  Yates,  4  Edw.  Ch.  134;  Stoney 
V.  Amer.  Life  Ins.  Co.,  11  Paige,  635;  Gillett  v.  Campbell,  1  Den.  520. 

VOL.  I.  14  209 


§  100        OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

authorized  to  exercise,  regulai-ity  is  always  presumed  in  favor 
of  any  person  wlio  had  no  notice  contravening  the  correctness 
of  these  appearances. 

§  09.  TentJi.  Adverse  Interest.  —  As  between  an  agent  and 
the  bank  an  act  will  be  without  authority  in  any  transaction 
in  which  A.  has  an  interest  adverse  to  that  of  B.,  unless  B., 
with  full  knowledge  of  all  the  facts,  authorizes  or  ratifies  the 
act ;  for  B.  contracts  for  the  disinterested  skill  and  industry  of 
A.  for  his  own  (B.'s)  benefit,  and  the  law,  to  protect  him  from 
all  possibility  of  fraud,  declares  that  no  such  transaction  shall 
bind  him  as  to  A.,  whether  A.  has  really  gained  by  it  or  not. 
Thus  all  profits  resulting  from  the  agency  belong  to  B.,  and 
an  agent  to  sell  cannot  himself  buy,  nor  if  it  is  his  duty  to 
buy  can  he  buy  of  himself. 

But  as  to  a  third  person,  C,  B.  may  be  held  by  a  transac- 
tion in  which  A.  is  adversely  interested,  if  C.  was  not  aware 
of  such  defect,  on  the  principle  of  inferred  authority.  (For 
illustration  see  chapter  on  Directors,  §  114.) 

The  president  and  cashier  of  a  national  bank  controlling 
its  finances  cannot  use  the  bank's  property  in  their  private 
business,  nor  in  general  bind  the  bank  by  any  contract  to 
which  either  of  them  is  a  party .^ 

§  100.  Eleventh.  Revocation.  —  The  clear  principle  of  jus- 
tice approved  by  the  Roman  law,  and  the  jurisprudence  of 
modern  commercial  nations,  is  that  the  bank,  or  the  power 
appointing  the  agent,  may  revoke  his  authority  at  pleasure, 
but  not  to  the  injury  of  A.  or  any  person,  C,  with  whom 
A.  has  dealt  as  agent.  Upon  any  contract  not  yet  legally 
consummated,  so  as  to  be  binding  in  law,  the  revocation 
operates  fully  ;  as  to  A.  from  the  time  he  knows  of  it,  as  to 
C.  from  the  time  he  knows  of  it,^  or  ought  to  know  of  it.^ 

1  §  99.    Rhodes  v.  Webb,  22  Minn.  292. 

1  §  1T)0.  An  agency  by  writing  revoked,  but  left  in  A.'s  hands,  and  C. 
deals  with  him  on  faith  of  it,  B.  held.     Beard  v.  Kirk,  11  N.  II.  397. 

2  Salte  V.  Field,  5  T.  R.  215;  Spencer  v.  Wilson,  4  Munf.  130.  A 
general  notoriety  is  equal  to  notice;  if  the  principal  does  what  he  can  to 

210 


REVOCATION.  §  101 

If  a  transaction  is  partly  executed,  and  is  severable,  the 
unexecuted  part  may  be  revoked.  But  if  A.  would  be  dam- 
aged by  a  revocation,  it  cannot  be  made  without  full  indem- 
nity to  him,  and  C.'s  acquired  legal  rights  can  never  be 
affected  by  revocation. 

An  authority  coupled  with  an  interest,  or  given  for  a  valua- 
ble consideration, cannot  be  revoked;  but  just  what  constitutes 
such  interest  is  not  perfectly  clear  on  the  authorities,  Wilde,^ 
C.  J.  says,  "  An  authority  given  on  sufficient  consideration  for 
the  purpose  of  securing  some  benefit  to  the  donee  of  the  au- 
thority is  irrevocable  "  (except  it  may  be  by  death,  as  the  case 
shows  was  understood).  Marshall,*  C.  J.  says,  "  The  interest 
that  can  protect  a  power  fully  during  life  (or  after  death  of 
the  one  who  creates  it)  must  be  an  interest  in  the  thing  itself 
which  is  the  subject  of  the  agency,  or  power,  and  not  merely 
in  that  which  is  produced  by  the  exercise  of  the  power. 

§  101.  Twelfth.  Ratification.  —  A  bank  may,  in  the  same 
way  as  any  other  principal,  ratify  after  performance  unauthor- 
ized acts  of  its  agents.  Such  ratification  may  be  direct,  or 
it  may  be  presumed  from  the  ordinary  circumstances  which 
constitute  practical  ratification  in  the  eye  of  the  law  ;  as,  for 
example,  from  its  receiving  the  benefit  of  the  acts.^ 

Any  act  done  avowedly  for  the  bank  may  be  adopted  with 
full  actual  knowledge  of  the  facts,  so  as  to  have  the  same 
effect  as  if  previously  authorized  by  the  same  power  ivhich  rati- 
fies, except  that  such  subsequent  action  can  have  no  retro- 
active effect  to  establish  duties,  a  compliance  with  which  was 
not  obligatory  on  C.  at  the  time  of  the  act,  perhaps  would 
have  been  unjustifiable  on  his  part.  (See  §  90,  above.)  If 
the  directors,  or  a  majority  of  them,  know  actually,  not 
merely  constructively,  of  the  contract,  and  acquiesce,  it  is  a 
ratification  without  any  vote. 

prevent  third  parties  from  being  misled,  and  to  give  notice  of  revocation 
as  general  as  that  of  the  agency  was,  it  is  sufficient. 

8  Smart  v.  Sandars,  5  C.  B.  895,  917. 

*  Hunt  V.  Rousmanier,  8  Wheat.  204. 

1  §  101.  Lime  Rock  Bank  v.  MacomDer,  29  Me.  564;  Hooker  v.  Eagle 
Bank,  30  N.  Y,  83. 

211 


§  101        OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

If  the  act  is  ratified  by  a  power  wliich  could  legally  have 
authorized  it,  all  parties  may  of  course  be  held  upon  it  as  a 
valid  act.  If  the  ratificr  could  not  have  given  legal  authority 
for  the  act,  the  adoption  of  course  cannot  render  it  any  more 
valid  than  [)revious  command  could  have  done.  The  best  law- 
is,  that  no  act  of  an  agent  beyond  the  authority  his  principal 
could  rightfully  give  him  shall  be  recognized  as  binding,  al- 
though benefit  received  must  be  accounted  for ;  but,  as  we 
have  seen  (§  90),  the  cases  arc  not  agreed  upon  this. 

One  thing  is  clear,  however,  ratification  by  the  board  of  di- 
rectors makes  the  act  their  own,  and  that  of  the  bank  if  pre- 
vious authority  from  the  directors  would  have  made  it  so,  and 
ratification  by  the  bank  makes  the  act  theirs  ;  whether  it  will 
bind  them  fully  depends  on  other  considerations  than  those 
with  which  this  division  is  chiefly  concerned.  (See  Ultra 
vires.')  Some  of  the  cases  upon  these  points  will  now  be 
more  particularly  noticed. 

(a)  It  is  a  well  settled  rule,  that  a  ratification  by  a  principal 
of  the  unauthorized  acts  of  an  agent,  in  order  to  be  effectual, 
must  be  made  with  a  knowledge  on  the  part  of  the  principal 
of  all  the  material  facts.  And  the  burden  is  upon  the  party 
who  relies  upon  a  ratification  to  prove  that  the  principal,  hav- 
ing such  knowledge,  acquiesced  in  and  adopted  the  acts  of  the 
agent.  It  is  not  enough  for  him  to  show  that  the  principal 
might  have  known  the  facts  by  the  use  of  diligence.^ 

When  the  alleged  principal  is  a  corporation,  a  ratification 
may  be  shown  by  proving  that  the  officers  who  had  the  power  to 
authorize  the  act  knew  of  it,  and  adopted  it  as  a  valid  act  of 
the  corporation,  although  no  formal  vote  was  passed  by  them.^ 

It  is  incumbent  upon  the  plaintiff  to  show  that  the  direc- 
tors, or  at  least  a  majority  of  them,  knew  of  the  contract,  and 
its  terms,  and  that  with  such  knowledge  they  acquiesced  in 
and  adopted  it.^ 

2  Combs  V  Scott,  12  Allen,  403. 

8  Sherman  v.  Fitch,  98  Mass.  59;  Lyndeboro  Glass  Co.  r.  Massachusetts 
Glass  Co.,  Ill  Mass.  315;  Kelley  v.  Newburyport  Horse  Railroad,  141 
Mass.  496. 

*  Murray  v  Nelson  Lumber  Co.,  143  Mass.  251. 
212 


RATIFICATION.  §  101 

So  where  the  cashier  of  a  bank  had  been  carrying  on 
transactions  with  the  bank  contrary  to  its  rules,  for  his  own 
benefit,  it  was  lield  that  the  fact  of  such  transac-  constructive 
tions   having   been   entered   on   the   books  of  the   knowledge 

.  Ill  c     1        ^^^  enough. 

bank  did  not  import  knowledge  on  the  part  of  the 
directors,  and  consequent  ratification.^ 

(6)  A  contract  may  be  ratified  by  the  stockholders  of  a 
corporation  if  it  is  made  with  full  knowledge  of  all  the 
material  facts,  although  in  ignorance  of  the  legal  effect  of 
such  facts.^ 

(c)  Retention  of  the  proceeds  of  the  transaction  renders 
the  officer's  act  as  binding  as  if  expressly  authorized.^  The 
president  of  a  bank  in  Nebraska  which  was  about  to  be  reor- 
ganized, professing  to  act  on  behalf  of  the  bank,  promised  D. 
to  give  him  ten  shares  of  the  stock  if  he  would  act  as  a  di- 
rector and  would  continue  the  dealings  of  his  (D.'s)  firm  with 
the  bank.  D.  was  elected  director  by  the  bank,  which  thus 
held  him  out  as  owning  ten  shares  at  least,  for  that  is  re- 
quired by  R.  S.  5146  as  a  qualification,  and  on  the  bank  list 
of  shareholders  D.  was  down  as  owner  of  ten  shares.  The 
court  held  that  there  was  sufficient  consideration  for  the  con- 
tract to  give  D.  the  shares,  (it  appeared  that  D.'s  firm  was 
about  to  withdraw  its  business  from  the  bank,)  and  that, 
as  the  president  avowedly  acted  for  the  bank,  and  the  latter 
had  received  the  benefit  of  the  transaction,  it  had  ratified  his 
action.^ 

Where  a  majority  of  the  directors  of  a  bank  make  an  infor- 
mal agreement  to  take  the  assets  and  assume  the  liabilities 
of  a  private  banking  business,  and  the  corporation  thereupon 
takes  and  retains  such  assets  under  the  agreement,  it  will  be 
held  to  have  ratified  the  action  of  the  directors,  and  to  be 
bound  by  all  the  terms  of  the  agreement.^ 

5  First  National  Bank  of  Fort  Scott  v.  Drake,  29  Kans.  311;  citing 
Citizens'  National  Bank  v.  Elliott,  55  Iowa,  104. 

6  Kelley  v.  Newburyport  Horse  Railroad,  141  Mass.  496. 

'  People's  Bank  of  Belleville  v.  Manufacturers'  National  Bank,  101 
U.  S.  181  (1879). 

8  Rich  V.  State  National  Bank  of  Lincoln,  7  Neb.  201. 
s  Bank  of  New  London  v.  Ketch um,  64  Wise.  7  (1885). 

213 


§  102        OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

((?)  A  cashier  accepted  a  note  in  payment.  lie  had  no 
authority  to  do  so,  but  a  ratification  was  inferred  from  the 
directors'  approval  of  it  in  connection  with  an  entry  of  "  paid  " 
in  a  certain  book  sliowing  the  transaction,  which  was  sub- 
mitted to  them.^*^ 

The  president  of  bank  A.  instructed  its  correspondent  bank, 
B.,  to  charge  against  A.  the  amount  of  a  private  note  of  his 
held  by  B.  An  account  was  rendered  sliowing  the  trans- 
action, which  was  accepted  by  A,  Held^  that  xV.  was  es- 
topped to  deny  the  correctness  of  the  charge,  as  was  also  its 
receiver.^^ 

§  102.    Tort. — An  agent.  A.,  is  responsible  to  the  bank  for 

all  damage  occasioned  to  the  bank  by  tortious  con- 

sponsibif  to     duct  not  Commanded  or  ratified  by  the  bank  ;  and 

the  order  of  a  superior  officer  is  no  excuse,  if  A. 

has  notice  of  the  wrongful  character  of  the  act.^ 

(a)  An  agent  is  responsible  to  a  third  person,  C,  for  mis- 
.  j^^  J.  _  feasance  or  positive  wrong,  always,  whether  the 
sponsible  to     bank  is  also  responsible  or  not ;  but  for  A.'s  negli- 

third  person.  .      .  ,         ,  /•    7  •  r\ 

gencc  or  omission  m  the  course  oj  his  agency,  Kj. 
must  look  to  the  principal. 

(^>)  The  bank  is  responsible  to  its  agent  for  injury  resulting 
from  its  own  negligence  or  wrongful  conduct,  but  not  for  that 
_    ,  resulting  from  the  negligence  or  fault  of  properly 

Bankrespon-  '^  *=    "  .  .  ,  . 

sibie  to  selected  fellow  servants ;  for  this  danger  is  within 

*^^" "  the  contemplation  of  the  parties  at  the  time  of  the 

contract  for  service,  and  may  be  supposed  to  be  allowed  for 
in  the  compensation,  and  is  as  likely  to  be  known  to  and  is 
as  easily  guarded  against  by  A.  as  by  B.,  or  perhaps  more 
easily .2  But  if  A.  is  injured  by  the  tort,  not  of  a  fellow 
servant,  but  of  one  in  command  over  him,  the  best  opinion 

10  Ecker  v.  First  National  Bank  of  New  Windsor,  59  Md.  291  (1882). 
"  Burton  v.  Burley,  9  Bissell,  253  (U.  S.  C.  C,  111.,  1880). 

1  §  102.  Minor  v.  IMechanics'  Bank,  1  Pet.  4G;  Pendleton  v.  Bank  of 
Kentucky,  1  T.  B.  Mon.  177. 

2  As  this  is  a  point  on  which  the  cases  are  not  uniform,  I  quote  au- 
thorities: Ilarri.son  i'.  Central  R.  R.  Co.,  2  V'rooni,  296  (N.  J.);  Snow  v. 
Housatonic  R.  R.  Co.,  8  Allen,  441  (Mass.);  Farwell  v.  Boston  &  Wor- 
cester R.  R.  Co.,  4  Met.  49  (Mass.). 

214 


TORT.  §  102 

is  that  the  corporation  is  liable  to  A.  as  it  would  be  to  a  third 
part  J. ^ 

(e)  The  bank  is  not  responsible  to  a  third  party  for  loss 
remotely  caused  by  its  negligence,  as  where  felony  intervenes, 
nor  if  such  party  has  deprived  himself  of  the  right   ^^^^  ^^_ 
to  redress  bv  his  own  contributory  fault,  nor  when  sponsible  to 

.  T    1  e     L  L'      ^  L      ^'^i^'i  person. 

the  loss  is  occasioned  by  an  act  oi  A.  entirely  out- 
side the  business  of  his  agency. 

The  grounds  of  liability  for  tort  are,  1st,  causation,  2d,  adop- 
tion, and,  3d,  such  position  of  control  as  gives  the  best  oppor- 
tunity of  guarding  against  the  injury.*     Every  one    (.^^^j^^g  ^^ 
must  so  conduct  his  affairs  as  not  to  damage  an-   liability  in 
other  by  any  action  or  omission,  whether  he  does 
the  business  himself  or  by  an  agent,  unless  the  conduct  caus- 
ing loss  is  clearly  recognized  as  so  necessary  for  the  good  of 
society  that  it  must  be  sustained,  even  though  producing  dam- 
age to  some  individual,  in  which  case  it  is  set  down  as  dam- 
num absque  injuria. 

Upon  these  grounds  a  bank  is  liable  for  damage  directly 
and  naturally  resulting  (1)  from  the  nature  ^  of  an  act  ordered 
by  itself  or  its  general  directions,  or  (2)  from  the   General 
act  of  an  agent  which  involves  a  breach  of  the  duty   '■'^^'^• 

3  Cleveland,  &c.  R.  R.  Co.  v.  Reary,  3  Ohio  St.  201 ;  citing  Dixon  v. 
Rankin,  1  Am.  R.  R.  Cas.  569  (Scotland);  Hayes  v.  Western  R.  R.  Co.,  3 
Cush.  270. 

*  For  example,  a  railroad  company  is  held  as  an  insurer  because  it  can 
best  guard  against  danger  and  loss,  and  because  it  would  be  extremely 
difficult  for  the  owner  of  goods  to  prove  embezzlement  or  other  actual 
fault  or  negligence ;  and  holding  the  company  to  such  liability  saves  much 
litigation  and  intricate  and  costly  inquiry,  and  works  no  injustice  for  the 
extra  risk  to  company,  and  security  to  the  customer  is  allowed  for  in  the 
compensation  for  the  company's  service.  See  C.  J.  Shaw's  opinion,  in 
Farwell  v.  Boston  &  Worcester  R.  R.  Co.,  4  Met.  49.  In  the  case  of  a  bank 
it  is  not  generally  deemed  necessary  to  carry  responsibility  beyond  the 
consequences  of  its  own  conduct,  and  that  of  its  agents  acting  in  its  busi- 
ness and  under  its  control.  There  is  a  possible  exception  in  the  case  of 
collections  by  a  correspondent  bank.  See  §  264.  Generally  the  question 
is,  who  has  the  efficient  control,  on  whose  account,  for  whose  benefit,  and 
under  whose  orders  is  the  business  done,  the  conduct  of  which  occasions 
the  loss. 

5  Peachey  v,  Rowland,  16  E.  L.  &  E.  442;  Rex  r.  Nutt,  Fitzg.  47. 

215 


§  102        OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

of  the  bank,^  or  (3)  from  the  manner  in  which  any  agent 
performs  the  functions  of  his  office,  or  any  business  he  may 
expressly  or  impliedly  be  authorized  to  do,  whether  it  be  mal- 
feasance, nonfeasance,  or  negligence  that  causes  the  damage. 
(4)  And  a  tort,  like  a  contract,  can  be  adopted.  If  the  bank 
or  the  board  of  directors  expressly  adopt  and  ratify  the  act,  or 
knowingly  retain  the  benefit  of  it,  or  in  some  cases 
the  services  of  the  wrongdoer,  it  will  make  the  tor- 
tious conduct  that  of  the  bank,  and  it  makes  no  difference 
how  clearly  ultra  vires  the  act  may  be,  except  as  bearing 
upon  (3)  or  (4)  by  showing  the  original  act  or  the  adoi> 
tion  not  to  be  within  the  course  of  the  agency  of  the  officer 
or  board. 

If  the  board  of  directors  order  or  ratify  an  act  which  is 
entirely  outside  the  business  of  the  bank,  or  the  handling  of 
its  interests  and  property,  it  is  not  the  bank's  tort ;  but  if 
they  publish  a  libel  or  fraudulent  statements  "^  in  the  corporate 
reports,  the  bank  is  liable,  as  it  would  probably  be  for  assault 
and  battery  if  the  paying  teller  should  attempt  forcibly  to 
recover  an  overpayment,^  or  the  cashier  should  break  the 
peace  in  attempting  to  seize  the  property  of  C.  in  payment  of 
his  debt  to  the  bank. 

In  some  cases  it  has  been  said,  that,  although  the  princi- 
pal is  liable  for  the  agent's  tort  in  the  bona  fide  prosecution 
Wilfulness  of  l^^s  master's  business,  yet  he  is  not  responsible 
not  the  test,  f^^j,  ^^iq  agcut's  wilful  ^  act,  —  that  the  wilfulness  of 
the  act  is  the  determining  fact.  But  it  is  perfectly  clear  that 
in  many  cases,  if  not  all,  the  line  is  not  drawn  in  that  way, 
and  that  wilfulness  is  of  import  only  as  expressing  the  fact 
that  the  agent  stepped  aside  ^^  deliberately  from  the  conduct 

«  Weed  V.  Panama  R.  R.  Co.,  17  N.  Y.  362;  Philadelphia  R.  R.  Co.  v. 
Derby,  14  How.  468;  Sinclair  v.  Pearson,  7  N.  H.  227. 

'  Cullen  V.  Thompson,  4  Macq.  II.  L.  Cas.  431;  9  Jur.  n.  s.  85. 

8  Ramsden  v.  Boston  &  Albany  R.  R.  Co.,  104  Mass.  117. 

8  McManus  v.  Crickett,  1  East,  106;  Thayer  v.  Boston,  19  Pick.  516; 
Davis  V.  Bangor,  42  Me.  522;  Watson  v.  Bennet,  12  Barb.  196;  Wright 
I'.  Wilcox,  19  Wend.  348;  Fox  v.  Northern  Liberties,  3  Watts  &  S.  103. 

10  Weed  v.  Panama  R.  R.  Co.,  17  N.  Y.  362;  Ranger  v.  Great  Western 
Fraud.  R-  R-  Co.,  5  II.  L.  Cas.  72;  Bloodgood  v.  Mohawk  R.  R.  Co., 
216 


TORT.  §  102 

called  for  by  his  agency.  If  the  damage  really  results  from 
the  doing  of  any  act  which  is  really,  or  upon  the  facts  as 
known  to  A."  is  properly  inferred  to  be,  within  the  scope  of 
A.'s  duties  as  agent,  the  bank  is  liable.  And  even  where  the 
principal  has  given  instructions  to  A.  not  to  do  the  act,  yet,  if 
it  is  done  by  him  in  the  course  of  the  regular  business  of  his 
office,  B.  is  liable.^2  This  of  course  is  not  consistent  with  the 
idea  that  wilfulness  excuses  the  principal.  It  is  impossible 
to  reduce  the  cases  to  anything  like  harmony,  except  upon  the 
theory  that  B.  is  responsible  for  all  torts,  whether  wilful  or 
not,  which  involve  a  breach  of  B.'s  duty,  or  result  naturally 
from  B.'s  orders,  or  arise  from  the  manner  in  which  A.  per- 
forms the  duties  which  he  has  actual  or  implied  authority  to 
do.  Except  as  regards  a  notary  or  correspondent  bank,  the 
whole  matter  of  a  bank's  responsibility  for  tort  reduces  itself 
to  express  authorization,  ratification,  and  control.  The  re- 
sponsibility of  B.  for  A.  for  tort  in  the  course  of  business 
grows  out  of  and  is  measured  by,  begins  and  ends  with,  his 
control  of  A.,^^  and  therefore  does  not  cover  the  act  of  one 
exercising  an  independent  calling  who  has  contracted  to  do 
the  work,^*  unless  the  injury  results  from  the  very  nature  of 
the  thing  contracted  for.  In  that  case,  the  bank  is  respon- 
sible as  the  cause  of  loss. 

The  following  decision  of  the  United  States  Supreme  Court, 
in  a  suit  against  a  corporation  for  libel,  presents  the  law 
clearly. 

"  A  railroad  corporation  was  held  responsible  for  the  pub- 
lication by  them  of  a  libel,  in  which  the  capacity  and  skill  of 
a  mechanic  and  builder  of  depots,  bridges,  station-houses,  and 
other  structures  for  railroad  companies,  were  falsely  and 
maliciously  disparaged  and  undervalued.     The  publication  in 

10  Wend.  9;  Edwards  v.  Union  Bank  of  Florida,  1  Fla.  136.   Trespass  vi 
See  case  of  the  Druid,  1  Wm.  Rob.  405;  and  Reeves's  Domest.   *'  o"'"*- 
Rel.  357. 

"  GofE  V.  Great  Northern  Railway,  30  L.  J.  Q.  B.  148. 

12  Philadelphia  &  Reading  R.  R.  v.  Derby,  14  How.  468;  Southwick 
V.  Estes,  7  Gush.  385. 

^3  McGuire  v.  Grant,  1  Dutch.  371  (N.  J.). 

"  9  M.  &  W.  710;  5  Exch.  721;  1  C.  B.  867. 

217 


§  102        OFFICERS    AND    AGENTS.  —  GENERAL    PRINCIPLES. 

that  case  consisted  in  the  preservation,  in  the  permanent 
form  of  a  book  for  distribution  among  the  persons  belonging 
to  the  corporation,  of  a  report  made  by  a  committee  of  the 
company's  board  of  directors,  in  relation  to  the  administration 
and  dealings  of  the  ])laintiff  as  a  superintendent  of  the  road. 

"  For  acts  done  by  the  agents  of  a  corporation,  either  in 
contractu  or  in  delicto,  in  the  course  of  its  business,  and  of 
their  employment,  the  corporation  is  responsible,  as  an  indi- 
vidual is  responsible  under  similar  circumstances. 

"  The  result  of  the  modern  cases  is,  that  a  corporation  is 
liable  civiliter  for  torts  committed  by  its  servants  or  agents, 
precisely  as  a  natural  person ;  and  that  it  is  liable  as  a  nat- 
ural person  for  the  acts  of  its  agents  done  by  its  authority, 
express  or  implied,  though  there  be  neither  a  written  appoint- 
ment under  seal,  nor  a  vote  of  the  corporation  constituting 
the  agency  or  authorizing  the  act."  ^^ 

(c?)  A  bank  is  not  generally  held  responsible  for  the  neg- 
ligence of  a  notary  public  in  the  performance  of  his  duties,^^ 
Notary  Pub-  unlcss  it  makes  the  notary  peculiarly  its  agent  by 
lie,  §  264.  appointing  him  to  act  for  it  for  a  definite  time,  and 
taking  bond  for  his  faithful  performance  of  duty,^^  and  even 
then  opinion  is  not  uniform  that  the  bank  is  liable.^^ 

The  ground  of  this  rule  is  that  the  notary  is  an  officer 
whose  duties  are  prescribed  by  law,  (and  in  most  States  an 
official  bond  is  required  to  secure  the  public  against  his  neg- 
ligence, and  this  should  be  the  case  in  all  States,)  and  as 
this  ground  does  not  apply  to  giving  notice  of  dishotior,  that 
not  being  a  duty  peculiarly  belonging  to  a  notary,  but  capable 
of  being  done  by  any  agent  of  the  bill  holder,  the  bank  is  not 

15  Philadelphia,  Wilmington,  &  Baltimore  R.  R.  v.  Quigley,  122  U.  S. 
607,  608.  See  also  Salt  Lake  City  v.  Ilollister,  118  U.  S.  256,  260  ;  New 
Jersey  Steamboat  Co.  v.  Brockett,  121  U.  S.  637;  National  Bank  v.  Gra- 
ham, 100  U.  S.  699,  702. 

i«  Britton  v.  Nicolls,  104  U.  S.  757;  First  National  Bank  of  Galveston 
V.  Butler,  19  Wk.  R.  601  (Ohio) ;  Baldwin  v.  Bank  of  Louisiana,  1  La. 
Ann.  13. 

"  Warren  r.  Suffolk  Bank,  10  Cush.  582  (Mass.);  Gerhardt  v.  Boat- 
man's Savings  Inst.,  38  Mo.  60. 

"  Baldwin  v.  Bank  of  Louisiana,  1  La.  Ann.  13. 
218 


TORT   BEYOND    OFFICER'S   SPHERE.  §  102 

relieved   of    responsibility   for    its    proper    performance    by 
employing  a  notary  to  do  it.^^ 

As  we  shall  see  hereafter,  there  is  much  conflict  on  the 
point  whether  a  bank  is  to  be  held  responsible  for   Correspond- 
the  negligence  of  a  correspondent  bank  to  which   collection. 
paper  is  sent  for  collection.     (§  264.) 

(e)  We  may  here  notice  a  few  cases  upon  the  liability 
of  a  bank  for  negligence.  The  elaborate,  thorough,  and 
luminous  opinion  delivered  by  Parker,  C.  J.  in  cases  on 
the  case  of  Foster  v.  The  Essex  Bank,2o  stands  "^s'ige^^e- 
forth  as  the  leading  authority.  The  facts  in  this  well  known 
case  were  as  follows.  A  cask  of  gold  doubloons  was  left  with 
the  bank  for  safe  keeping,  the  circumstances  of  its  reception 
constituting,  in  the  opinion  of  the  court,  a  purely  gratuitous 
bailment.  It  was  kept  in  the  bank  vaults  with  precisely  the 
same  care  with  which  the  funds  and  property  of  the  bank 
were  kept.  But  the  cashier  of  the  bank,  with  the  connivance 
of  a  subordinate  clerk,  stole  from  the  vaults  a  quantity  of 
bank  property,  and  also  a  considerable  amount  of  this  gold. 
It  was  no  part  of  the  duty  of  either  the  cashier  or  clerk  to 
open  or  meddle  with  the  keg  in  which  the  doubloons  had  been 
secured  by  their  depositor ;  and  no  officer  of  the  bank  had,  from 
the  nature  of  the  mandate,  any  right  to  examine  or  so  much 
as  touch  the  contents  of  the  keg.  The  counsel  for  the  plain- 
tiff urged  that  the  principal  was  liable  for  the  tortious  act 
of  its  agent,  the  cashier.  But  the  court  said,  upon  the  au- 
thority of  Mechanics'  Bank  v.  Bank  of  Columbia,^^  Tort  be- 
that  the  liability  of  the  principal  depends  upon  the  oToffidar 
facts,  (1)  that  the  act  was  done  in  the  exercise,  business. 
and  (2)  within  the  limits,  of  the  power  delegated.  For 
example,  for  money  credited  in  the  books  of  the  teller,  or 
proved  to  have  been  deposited  with  him,  though  not  credited, 
the  bank  is  answerable.  The  inquiry  then,  in  this  case,  must 
simply  be,  whether,  when  the  gold  was  taken  from  the  cask 

"  Allen  V.  Merchants'  Bank,  22  Wend.  21.5  (N.  Y.). 
'^  17  Mass.  479,  followed  in  Giblin  v.  McMullen,  2  L.  R.  P.  C.  317,  and 
in  Scott  V.  National  Bank  of  Chester  Valley,  72  Penn.  St.  471. 
21  5  Wheat.  326. 

219 


§102        OFFICERS    AND    AGENTS. —  GENERAL   PRINCIPLES. 

by  the  cashier  and  clerk,  they  were  in  the  course  of  their 
official  eini)loymcnt.  Their  master,  the  bank,  had  no  right 
to  mctldlc  with  or  to  open  the  cask ;  it  neither  could  delegate, 
nor  did  it  attenii)t  to  delegate,  any  authority  to  any  of  its 
officers  so  to  do.  It  was  not  within  the  duty  of  the  cashier 
to  know,  or  to  take  any  account  of,  the  contents.  He  was  not 
therefore  acting  within  the  scope  of  his  authority  when  he 
committed  the  villany  ;  and  the  bank  is  no  more  answerable 
than  if  he  iiad  stolen  the  pocket-book  of  an  individual  from 
the  bank  counter.  "If,  then,"  the  learned  judge  proceeds, 
"  it  be  asked,  for  what  acts  of  a  cashier  or  clerk  the  bank 
would  be  answerable,  I  should  answer :  for  any  which  pertain 
to  their  official  duty  ;  for  correct  entries  in  their  books,  and 
for  a  proper  account  of  general  deposits ;  so  that,  if  by  any 
mistake,  or  by  fraud,  in  these  particulars,  any  person  be  in- 
jured, he  would  have  a  remedy .^2  .  .  .  For  the  correct  conduct 
of  all  their  servants,  in  their  proper  sphere  of  duty,  they  are 
answerable."  In  this  especial  case,  ''  if  the  cashier  had  any 
official  duty  to  perform  relating  to  the  subject,  it  was  merely 
to  close  the  doors  of  the  vault  when  banking  hours  were 
over,"  but  neither  to  open  the  keg,  nor  to  touch  its  contents. 
The  bank  is  "  not  answerable  for  special  deposits,  stolen  by 
one  of  their  officers,  any  more  than  if  stolen  by  a  stranger ; 
or  any  more  than  the  owner  of  a  warehouse  would  be,  who 
permitted  his  friend  to  deposit  a  bale  of  goods  there  for  safe 
keeping,  and  the  goods  should  be  stolen  by  one  of  his  clerks 
or  servants. 

(/)  "The  undertaking  of  banking  corporations  with  re- 
Banks  do  not  spect  to  their  officers  is,  that  they  shall  be  skilful 
™s"v  of"  aiid  faithful  in  their  employments  :  they  do  not  war- 
their  officers    yr^^^^  ^i^gjj.  o-encral  honestv  and  uprightness.      And 

bevoiid  their  «=  "  i     ,,oq        mi 

duties.  it    is   the   same   with   individuals.    ^-^      ihe   cited 

22  To  the  point  that  the  bank  is  liable  for  frauds  or  mistakes  of  the 
cashier  or  clerk  in  their  entries  in  the  books  of  the  bank,  and  in  false  ac- 
counts of  deposits,  may  be  cited  also  Salem  Bank  v.  Gloucester  Bank,  17 
Mass.  1 ;  Gloucester  Bank  v.  Salem  Bank,  id.  33 ;  Andrews  v.  President, 
&c.  of  Suffolk  Bank,  12  Gray,  461. 

23  Citing  Finnucane  v.  Small,  1  Esp.  315. 

220 


TORT   BEYOND    OFFICER'S   SPHERE.  §  102 

case  of  Finnucane  v.  Small  "  is  in  all  respects  like  the  one 
before  us,  except  that  the  goods  were  to  be  kept  for  hire," 
a  difference  altogether  in  favor  of  the  present  defendants. 
In  answer  to  this  case,  it  was  observed  in  argument  that 
"  the  cashier  of  the  bank  was  trusted,  and  therefore  the 
doctrine  of  Lord  Kenyon  did  not  apply.  But,  if  we  are 
right  in  the  principles  before  stated,  he  was  not  trusted 
in  this  business ;  neither  he  nor  his  principal,  the  bank, 
having  anything  to  do  with  the  chest  or  cask  but  to  give 
it  a  place  in  the  vault,  and  to  lock  it  up  when  the  hours  of 
business  were  over;  and  so  the  cashier  must  be  considered 
like  the  servant  in  the  case  cited." 

(g)  It  was  acknowledged  by  the  counsel  for  the  bank,  in  this 
case,  that  a  more  difficult  question  would  have  been  presented 
had  the  board  of  directors,  or  their  predecessors,  Negiio-ence 
shown  any  negligence  in  the  original  appointment  °*  directors. 
or  the  subsequent  retention  of  the  defaulting  officials.  Had 
these  persons  borne  bad  characters,  or  had  circumstances  of 
suspicion  demanding  inquiry  come  to  the  knowledge  of  the 
board,  or  had  the  board  for  any  reason  been  unwilling  to  trust 
their  own  property  with  them  in  the  same  manner  in  which 
they  trusted  the  property  of  the  bank,  then  the  plaintiff  might 
have  had  a  better  case.  No  adjudicated  cause  aids  us  in 
determining  what  redress,  if  any,  the  law  would  allow  to  the 
sufferer  who  had  lost  a  special  deposit  under  such  circum- 
stances of  additional  aggravation.  An  opinion  must  be 
matter  of  speculation.  Very  probably  he  might  be  allowed 
to  recover.  But  if  he  were,  it  is  obvious  that  his  action 
could  not,  as  in  this  case,  be  assumpsit.  It  should  be  an 
ordinary  action  on  the  case  for  damages,  laying  an  injury 
or  loss  directly  resulting  from  the  wrongful  default  of  the 
corporation.  The  chief  difficulty  in  the  way  of  the  plaintiff's 
success  in  such  a  suit  would  probably  be  in  showing  that  the 
default  of  the  directors  was  in  fact  the  causa  proxima  of  his 
mishap.  It  would  of  course  be  easy  to  show  that  it  facilitated 
the  occurrence  of  the  mishap,  but  the  only  immediate  cause 
in  the  eye  of  the  law  might  perhaps  be  regarded  as  the  felony 
of  the  officials. 

221 


§102        OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

(7i)  There  is  an  English  case  of  very  similar  facts  and  law,^* 
and  also  another  English  case  is  to  the  same  effect,  going,  how- 
ever, even  further.  The  customer  kept  his  trunic  of 
securities  with  his  bankers,  and  one  of  the  bankers 
himself  obtained  access  to  the  trunk,  and  abstracted  securities 
therefrom.  It  was  held  that  the  customer  could  have  recourse 
for  reimbursement  only  against  the  estate  of  the  guilty  part- 
ner, not  against  the  property  of  the  firm ;  inasmuch  as  it 
did  not  appear  that  the  firm  had  any  authority  to  open  the 
trunk  or  examine  its  contents.''^^  Apparently,  if  the  firm 
had  had  such  authority,  the  act  of  the  individual  partner  in 
reaching  the  securities,  being  thus  within  the  scope  of  this 
authority  as  a  partner,  would  have  subjected  the  firm  to  re- 
sponsibility for  his  wrongful  act,  done  within  the  scope  of 
this  authority. 

But  where  the  customer  deposited  with  his  bankers  certain 
certificates  of  stock  for  the  purpose  of  having  the  dividends 
collected  by  the  bankers  for  his  account,  paying  them  a  small 
commission  for  their  trouble,  and  the  manager  fraudulently 
abstracted  the  certificates  and  by  forged  transfers  got  pos- 
session of  the  stock,  the  customer  was  allowed  to  recover  the 
value  of  the  stock  from  the  company,  but  without  costs.  He 
then  sought  to  collect  the  costs  from  the  bankers.  The  court 
held  that  the  bankers  were  bailees  for  reward,  and  had  been 
guilty  of  culpable  negligence  in  keeping  the  certificates  in  a 
safe  to  which  the  manager  had  such  uncontrolled  access  ;  but 
nevertheless  that  the  plaintiff  could  not  prevail  in  this  suit, 
since  the  loss  of  his  costs  was  too  remote  a  consequence  of 
the  negligence  of  the  bankers  to  permit  of  their  being  held 
liable.26 

If  the  bankers  themselves  are  guilty  of  a  misappropriation 
of  property  deposited  with  them  for  a  special  purpose,  it  seems 
hardly  necessary  to  say  that  they  will  be  liable.^^ 

(/)  Upon  this  point  the  same  seventeenth  volume  of  the 

2<  Giblin  v.  McMullen,  2  L.  R.  P.  C.  317. 

25  Ex  parte  Eyre,  1  Phil.  227. 

26  In  re  United  Service  Company,  Ex  parte  Johnston,  G  L.  R.  Ch.  212. 

27  Ex  parte  Bond,  1  M.  D.  &  DeG.  10. 

222 


REMOTE   CONSEQUENCES   OP   NEGLIGENCE.  §  102 

Massachusetts  Reports,  which  is  peculiarly  rich  in  interesting 
and  ably  argued  bank  cases,  contains  a  valuable  decision. 
The  facts  of  the  case  of  The  Salem  Bank  v.  The  Gloucester 
Bank  2^  were  as  follows.  A  large  number  of  the  Bank  not  re- 
bills  or  notes  of  the  bank  were  prepared  for  cir-  r'moteresult 
culation,  and  were  signed  by  the  cashier.  They  gdce."^^''' 
only  needed  for  their  perfection  the  signature  stolen  bills. 
of  the  president.  This,  however,  they  did  not  receive,  and 
they  were  kept  in  this  condition  for  several  years,  lying 
in  the  cashier's  desk  in  the  open  room  of  the  bank. 
Thieves  broke  into  the  bank,  and  attempted  to  break  its 
vault  without  success.  But  they  broke  open  the  desk  and 
stole  the  incomplete  bills,  forged  the  president's  signature 
upon  them,  and  put  them  in  circulation.  The  holders 
sought  to  recover,  among  other  pleas,  under  a  declaration 
for  damages,  alleging  that  their  loss  was  the  result  of  the 
excessive  and  wrongful  negligence  of  the  bank  in  allowing 
notes  so  nearly  perfect  to  lie  in  so  exposed  a  place.  Of  course 
no  business  man  could  deny  that,  practically,  the  manner  in 
which  these  notes  were  kept  was  unpardonably  careless.  Had 
they  been  in  the  vault,  it  was  practically  proved  that  tJiey 
would  have  remained  intact,  since  the  vaults  were  not  opened. 
But  the  plaintiffs  were  not  allowed  to  recover.  The  court  said 
that  for  the  "  indirect  and  remote  consequences  of  the  negli- 
gence "  the  corporation  was  not  answerable.  They  did  not 
leave  finished  notes  in  this  exposed  condition,  but  only  paper 
which  required  the  further  and  independent  act  of  forgery, 
an  act  which  is  a  felony,  to  make  them  capable  of  working  a 
deception.  The  neglect  was  only  causa  remota,  and  the  bank 
could  not  be  held.  The  decision  is  clearly  reasoned  and  per- 
fectly satisfactory  in  law.  Unfortunately,  its  value  is  rather 
negative  than  positive,  for  it  furnishes  very  little  aid  towards 
the  determination  of  what  species  of  directorial  negligence  the 
results  would  be  regarded  as  sufficiently  immediate  to  be 
answered  for  by  the  bank.  It  should  perhaps  be  remarked 
that  it  was  not  intimated  in  this  case  that  the  directors  had 
been  in  any  default  in  choosing  or  keeping  a  cashier  whose 

28  17  Mass.  1. 

223 


§  103        OFFICERS   AND    AGENTS. —  GENERAL   PRINCIPLES. 

character  tlicy  ought  to  have  known  to  be  such  as  to  render 
him  unfit  for  the  responsibility  imposed  upon  him. 

(/)  It  is  a  general  rule,  that,  except  under  very  peculiar 
circumstances,  a  bank  will  not  be  held  liable  to  make  good 
such  acts  or  undertakings  of  their  ofiicers  as  are  unwarrant- 
able, unusual,  or  indirectly  in  contravention  of  any  law.^^ 

§  103.  Representations.  —  An  agent.  A.,  cannot  indirectly 
by  declarations  make  a  contract  for  the  bank  (B.),  which  he 
could  not  make  directly,  nor  ever  affect  B.  by  his  representa- 
tions or  admissions  beyond  the  scope  of  the  business  for 
which  he  has  actual  or  inferred  authority.'' 

But  if  A.  has  authority  to  make  a  declaration,  expressly  or 
by  usage,  or  by  implication,  as  from  his  acting  in  an  office  in 
which  such  authority  inheres,  or  if  in  the  course  of  transact- 
ing business  for  the  bank  with  C,  for  which  he  has  actual  or 
inferred  authority,  he  makes  declarations  pertinent  to  that 
business,  such  statements  are  as  to  C.  the  statements  of  the 
bank,  and  affect  it  just  as  they  would  if  made  by  a  principal 
transacting  the  business  for  himself,  viz. :  1st,  if  material 
(i.  6.  (a)  enter  substantially  into  the  inducement  to  C.'s  con- 
duct in  the  matter),  and  are  such  as  he  has  a  right  to  rely 
upon  (i.  e.  (6),  not  mere  expressions  of  opinion,  or  recommen- 
dation, or  (c)  statements  regarding  matters  equally  w^ithin 
the  knowledge  of  C,  or  {d}  of  the  falsity  of  which  C.  has 
notice),  (e)  and  made  not  in  jest,  but  in  such  manner  as 
naturally  to  influence  C,  and  therefore  presumably  made  with 
that  intent,  (/)  and  C.  does  actually  rely  upon  them,  and  sus- 
tains damage  thereby,  the  bank  is  liable  for  deceit  if  the  state- 
s' Wyman  v.  Ilallowell  &  Au.sfusta  Rank,  14  Mass.  58;  where  the  ques- 
tion was  whether  a  bank  could  be  bound  to  pay  the  bank  notes  and  bills 
of  its  predecessor,  of  the  same  name,  by  reason  of  promises  to  that  effect 
made  by  its  president  and  cashier.  Lloyd  v.  West  Branch  Bank,  15  Penn. 
St.  172;  where  the  cashier  had  received,  without  consideration,  a  bundle 
of  notes  "  the  issuing  of  which  had  been  interdicted  "  by  a  statute.  Fos- 
ter V.  Essex  Bank,  17  INIass.  479. 

0  §  103.  Franklin  Bank  v.  Stewart,  37  Me.  519;  Kennedy  v.  Otoe  Co. 
Bank,  7  Neb.  65.  See  Washington  Bank  v.  Lewis,  22  Pick.  24;  Lloyd  v. 
West  Branch  Bank,  15  Penn.  St.  172;  Merchants'  Bank  v.  State  Bank, 
10  Wall.  675. 

224 


REPRESENTATIONS    AND    WARRANTY.  §  103 

ments  were  false  to  the  (,^)  knowledge  of  the  officer,  or  made 
without  such  reason  for  belief  as  a  man  of  ordinary  prudence 
would  require  for  his  own  guidance,  or  C.  may  upon  such 
cause  rescind  his  contract.^  2d,  if  made  during  (not  alter) 
the  negotiation  for  sale  of  goods  with  the  qualities  (a),  (5), 
(e),  and  (/),  it  is  a  warranty  if  so  intended  and  understood 
by  the  parties. ^  If  (^)  is  present,  it  is  a  warranty  and  also  a 
fraud.  If  made  in  good  faith,  it  is  still  a  warranty.  If,  how- 
ever, it  was  intended  only  as  a  bare  afifirmation,  it  is  a  repre- 
sentation, not  a  warranty.^  Any  affirmation  of  the  quality 
or  condition  of  the  goods  with  the  above  limitations  (a),  (5), 
(e),  and  (/),  is  a  warranty.^  3d.  The  declaration  or  admis- 
sion may  amount  to  a  contract  or  the  renewal  of  one,  as 
when  a  cashier  declares  a  check  drawn  on  his  bank  to  be 
"  good,"  ^  or  when  the  president,  having  power  by  usage, 
takes  a  debt  out  of  the  Statute  of  Limitations  by  his  acknowl- 
edgment.*^ 

C.  must  be  careful  not  to  rely  upon  A.'s  representations  un- 
til assured  that  he  has  cither  authority  for  the  very  purpose 
of  making  them,  or  authority  to  do  the  business  to  which  they 
are  pertinent,  and  in  the  course  of  which  they  are  made  ;  he 
must  never  take  an  agent's  own  representations  as  to  the 
extent  of  his  authority.'' 

As  a  general  rule,  information  as  to  a  past  and  completed 
transaction  is  courtesy,  and  no  more ;  but  if  the  knowledge  has 
a  bearing  on  a  present  or  future  dealing  with  the   Past  trans- 
bank,  it  will  come  within  the  sphere  of  liability  as   actions. 
above,  at  least  if  matter  to  which  it  is  material,  or  the  effect 

^  See  Kerr  on  Fraud  and  Mistake. 

2  Bacon  v.  Brown,  3  Bibb,  35;  Davis  v.  Meeker,  5  Johns.  354;  Roscorla 
V.  Thomas,  8  Q.  B.  234. 

3  Swett  V.  Colgate,  20  Johns.  196;  Conner  v.  Henderson,  15  Mass. 
320. 

4  Hillman  v.  Wilcox,  30  Me.  170;  Beals  v.  Olmstead,  24  Vt.  115;  Os- 
good V.  Lewis,  2  Har.  &  G.  495. 

5  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604. 

«  JMorgan  i-.  Merchants'  National  Bank  of  Memphis,  13  Lea,  234. 
■^  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank.  16  N.  Y. 
125. 

VOL.  I.  16  225 


§  103        OFFICERS    AND   AGENTS,  —  GENERAL    PRINCIPLES. 

of  tlic  statement  upon  such  dealintrs  may  be  supposed  fairly 
within  the  contcmi»lation  of  tlie  parties. 

(rt)  Some  cases  in  ilUistration  will  be  noticed.  In  the 
Farmers  and  Mechanics'  Bank  of  Kent  County  v.  Butchers  and 
Drovers'  Bank,^  the  teller,  duly  authorized  to  certify  a  check 
if  the  drawer  had  funds  in  the  bank,  certified  the  check  of  a 
drawer  who  had  no  funds.  The  certification  under  the  cir- 
cumstances was  clearly  unauthorized ;  but  the  holder  had  no 
notice  of  the  facts  which  rendered  it  so.  Mr.  Justice  Selden, 
delivering  the  opinion  in  the  New  York  Court  of  Appeals, 
said  in  substance :  Tlie  bank  leads  persons  to  put  confidence 
in  its  teller,  through  whom  they  are  obliged  to  deal  with  the 
bank.  For  his  acts,  therefore,  within  the  scope  of  his  employ- 
ment and  authority,  so  far  as  can  be  known,  the  bank  must 
be  responsible.  Here  the  fact  of  whether  or  not  there  were 
funds  was  one  whicli  could  only  be  learned  by  asking  the 
teller  himself.  Knowledge  that  he  could  not  certify  without 
funds  is  not  knowledge  of  the  extrinsic  fact  that  there  are  no 
funds.  A  check,  taken  on  the  faith  of  the  officer's  represen- 
tation that  he  has  authority  to  certify,  does  not  bind  the  bank, 
if  he  had  really  no  such  authority.  But,  provided  he  has  the 
authority,  then  a  check  taken  on  the  strength  of  his  represen- 
tation that  there  are  funds  binds  the  bank,  unless  the  holder 
knows  as  a  fact  that  the  representation  is  false.  The  sound 
rule  seems  to  be,  that,  where  a  party  dealing  with  an  agent 
ascertains  that  the  agent's  act  corresponds  exactly  with  the 
terms  of  the  power,  he  may  take  the  agent's  representation  as 
to  any  extrinsic  fact,  peculiarly  within  the  agent's  knowledge, 
and  not  ascertainable  by  a  comparison  of  the  power  with  the 
act  done  under  it.  The  distinction  is  clear,  and  is  well  put  by 
the  learned  judge.  The  bank  docs  not  hold  out  the  officer  as 
authorized,  and  he  is  not  authorized,  to  state  what  are  or  are 
not  his  proper  functions.  But  all  his  acts,  however  irregular 
or  fraudulent,  done  in  pursuance  of  a  function  which,  as  a 
matter  of  fact,  the  bank  has  in  any  manner  made  properly  his, 
must  affect  the  bank,  if  the  party  dealing  with  him  acted  in 
good  faith.     To  the  like  effect  was  the  holding  in  Ex  parte 

8  IG  N.  Y.  125. 
226 


REPRESENTATIONS.  §  103 

Overend,  Giirncy,  &  Co.'^  Acceptances  made  by  an  officer 
duly  authorized  to  accept  upon  the  receipt  of  collateral  secu- 
rity, but  who  in  this  instance  had  accepted  without  such  re- 
ceipt, were  holden  good  as  against  the  bankers  in  the  hands 
of  a  third  party,  holding  for  value  and  ignorant  of  the  facts 
which  had  rendered  the  acceptance  really  irregular  and  un- 
authorized. 

Since  the  power  of  selling  railroad  bonds  does  not  pertain 
to  a  bank  organized  under  the  act  of  Congress  of  1864,  if  a 
bank  undertakes  so  to  sell,  and  the  teller  makes  false  repre- 
sentations to  a  purchaser,  no  action  will  lie  for  the  purchaser 
against  the  bank  to  recover  damages  for  the  deceit.^^ 

Declarations  and  admissions  of  the  officer  or  agent  of  a 
bank  bind  the  bank  only  when  they  are  made  by  him  officially, 
with  the  intent  of  binding  the  bank,  and  either  within  the 
scope  of  his  general  official  employment,  or  by  virtue  of  a  spe- 
cial authority  lodged  in  him  by  the  directors.  Otherwise,  like 
the  remarks  of  any  third  person,  they  are  utterly  incompe- 
tent.^^  The  declarations  of  directors,  even  more  than  those  of 
other  officers,  are  impotent  to  bind  the  bank ;  for  the  reason 
that  no  individual  director,  as  such,  has  any  power  whatsoever 
in  reference  to  the  affairs  of  the  bank.  Only  when  and  as 
he  is  acting  in  conjunction  with  his  co-directors  is  he  intrusted 
with  what  may  be  described  as  an  undivided  share  in  the 
general  administration  of  its  affairs.  But  to  him  individually, 
at  least  strictly  in  his  capacity  as  director,  no  department  of 
those  affairs  is  allotted,  and  his  sole  admission  or  declaration 
in  any  department  is  therefore  in  excess  of  both  his  duty  and 
his  authority,  and  is  null  and  meaningless  in  law.^^ 

(/>)  As  a  general  rule  statements  made  by  a  bank  officer 
concerning  any  past  transaction,  though  the  matter  to  which 

8  L.  R.  4  Ch.  460. 

^•^  See  also  the  cases  of  Atlantic  Bank  v.  Merchants'  Bank,  10  Gray, 
532;  Skinner  v.  Merchants'  Bank,  4  Allen,  290;  Weckler  v.  First  Na- 
tional Bank,  42  Md.  581. 

"  Stewart  v.  Huntingdon  Bank,  11  Sers;.  &  R.  267. 

^2  Hartford  Bank  v.  Hart,  3  Day,  491 ;  Pemigewassett  Bank  v.  Rogers, 
18  N".  H.  255;  Loomis  r.  Eagle  Bank,  Disney,  285.  See  also  Soper  v. 
Buffalo  &  Rochester  R.  R.  Co.,  19  Barb.  310. 

227 


§  103        OFFICERS   AND   AGENTS.  —  GENERAL   PRINCIPLES. 

Past  trans-       ^^^^J  ^'^f^l'  is  OUG  Avllich    fulls  Avitllin  tllG  SCOpC  of  llis 

actions.  employment,  will  not  be  regarded  as  binding  upon 

the  bank.  They  are  considered  to  be  given  simply  as  a  mat- 
ter of  favor  to  the  inquirer.  The  ollicer  owes  no  duty  to  the 
bank  to  answer  interrogatories  which  relate  only  to  a  com- 
pleted transaction.  He  is  not  employed  for  that  purpose,  or 
held  out  by  the  bank  as  intrusted  to  fulfil  such  a  function. 
The  interrogator  simply  requests  a  favor  from  the  oflker  per- 
sonally, which,  if  granted,  can  create  no  liability  as  against 
the  bank.i3  But  an  exception  will  arise  to  this  rule  where 
the  oOlcer  of  the  bank  knows  that  his  answer  to  the  inquiry  is 
to  form  the  ground  of  future  action  on  the  part  of  the  in- 
quirer, so  that  accurate  information  is  not  merely  desired  to 
satisfy  a  curiosity  as  to  an  occurrence  wholly  in  the  past,  but 
is  sought  and  needed  for  governing  important  dealings  in  the 
present  and  future.  So,  too,  if  the  declarations  or  admis- 
sions, though  relating  to  something  that  is  in  mere  point  of 
time  past,  yet  have  for  any  reason  a  present  interest  and 
weight,  or  from  any  combination  of  circumstances  assume  a 
still  subsisting  importance,  they  will  then  be  admissible  as 
constituting  a  part  of  the  re.s  gestae,  without  regard  to  the  fact 
that  the  precise  act  itself  to  which  they  relate  was,  strictly 
speaking,  concluded  some  time  before.  Thus  where  a  person 
who  had  been  called  upon  to  pay  a  note,  insisted  that  it  had 
been  paid  ;  and  in  the  discussion  the  president  examined  the 
books  of  the  bank,  became  satisfied  of  the  payment,  and  admit- 
ted it  to  have  been  made  ;  it  was  afterward  held  that  evidence 
of  his  admission  was  competent  to  bind  the  bank,  because  in 
fact  it  constituted  a  part  of  the  res  gestce,  and  was  made  by 
him  in  the  execution  of  his  ordinary  official  duties.^* 

The  cashier  and  a  director  falsely  told  C.  that  they  consid- 
ered G.,  the  maker  of  a  note,  perfectly  good.     C.  indorsed  the 

18  Pemigewassett  Bank  v.  Rogers,  18  N.  H.  255;  Franklin  Bank  v. 
Steward,  37  Me.  519;  Lime  Rock  Bank  v.  Ilewett,  52  id.  531;  Franklin 
Bank  V.  Cooper,  39  id.  5-12 ;  Sterling  v.  Marietta  &  Susquehanna  Trading 
Co.,  11  Serg.  &R.  179. 

1*  Franklin  Bank  v.  Steward,  37  Me.  519;  Bank  of  Monroe  v.  Field,  2 
Hill,  415. 

228 


REPRESENTATIONS.  §  104 

note,  and  G.  thereupon  obtained  its  discount  by  the  bank. 
The  representations  not  being  in  the  course  of  the  agency  of 
the  officers,  the  bank  could  not  be  held,  though  they  were 
wilfully  false. ^^ 

L.,  who  owned  six  shares  of  bank  stock,  asked  C.  for  a  loan 
on  pledge  of  them.  C,  calling  at  the  bank  to  ask  if  the  stock 
was  unencumbered,  was  told  by  the  officer  in  charge  of  the 
bank's  business  that  the  stock  was  free,  and  he  might  safely 
take  it ;  and  it  was  held  that  the  bank  was  estopped  from 
declaring  the  stock  forfeit  for  dues  to  it  from  L.  before  the 
shares  were  pledged  to  C.^^ 

(c)  A  bank  cannot  escape  the  consequences  of  misrepre- 
sentation made  by  its  officer  by  showing  that  the  falsehood 
was  told  such  officer  by  another,  also  an  officer  of  the  bank-^" 

(c?)  A  bank  is  not  bound  by  its  teller's  statement  that  the 
indorsement  on  a  check  is  genuine.^^ 

(e)  If  C.  lends  money  to  the  cashier  (A.)  for  his  pri- 
vate use,  and  receives  from  him  a  certificate  in  the  lender's 
name  and  signed  by  the  president,  but  stating  that  shares  are 
transferable  only  on  the  bank-books  and  on  surrender  of 
former  certificate,  and  no  certificate  has  been  surrendered, 
and  the  bank  has  neither  ratified  the  transaction  nor  re- 
ceived benefit  therefrom,  C,  though  defrauded  by  the  cashier, 
has  no  remedy  against  the  bank.  The  bargain  was  with  A. 
personally.  C.  lent  him  money  for  his  own  use,  not  for  the 
bank  ;  and,  his  representations  being  in  his  own  business, 
could  not  affect  the  bank.  Moreover,  the  certificate  on  its 
face  gave  0.  notice.^^ 

§  104.  "When  the  bank  has  notice.  —  The  grounds  of  de- 
cision in  this  matter  arc  :  — 

(a)   First.     Presumed  communication.  —  It  is  the  duty  of 
an  agent  to  give  the  bank  the  benefit  of  his  knowledge  con- 
is  Mapes  t'.  Second  National  Bank  of  Titusville,  80  Pa.  St.  163. 
1^  Moore  v.  Bank  of  Commerce,  52  Mo.  377  (1873). 
"  Gould  V.  Cayuga  National  Bank,  56  How.  Pr.  505  (1877). 

18  Walker  v.  St.  Louis  National  Bank,  5  Mo.  App.  214  (1878). 

19  Moores  v.  Citizens'  National  Bank  of  Piqua,  111  U.  S.  156  (1884). 
See  People's  Bank  v.  Kurtz,  99  Pa.  St.  344;  Merchants'  Bank  r.  Living- 
ston, 74  N.  Y.  223;  Western,  &c.  R.  R.  v.  Franklin  Bank,  60  Md.  361. 

229 


§  106        OFFICERS    AND    AGENTS.  —  GENERAL   PRINCIPLES. 

Grounds  of  ccming  the  business  in  which  he  is  engaged  by  B., 
decisiuu.  j^jj(i  in  the  absence  of  adverse  interest  rebutting  the 
inference,  he  is  presumed  to  do  his  duty. 

(6)  Second.  Identity.  —  B.  cannot  take  any  advantage  of 
a  third  person,  C,  by  employing  A.  to  negotiate  the  business 
instead  of  doing  it  himself.  Unless  C.  has  notice  to  the  con- 
trary, he  has  a  right  to  regard  A.  and  B.  as  identical  in  re- 
spect to  all  notice  that  is  received  in  the  very  transaction ; 
for  that  B.  would  have  received  if  he  had  conducted  the  busi- 
ness himself,  and  also  in  respect  to  information  concerning 
the  matter  which  C.  knows  A.  to  possess  by  previous  or  out- 
side acquirement,  and  perhaps  for  that  very  reason  does  not 
further  enforce  the  subject  upon  A.'s  attention  during  the 
transaction.  In  such  cases  the  notice  enters  into  the  dealing. 
Knowledge  ^^  witliiu  the  contemplation  of  both  parties.  And 
of  bank.  further,  B.  cannot  escape  from  the  effect  of  knowl- 
edge he  himself  possesses  by  employing  A.,  and  if  there  is 
reasonable  time  for  B.  to  communicate  his  knowledge  to  A. 
before  the  event  which  raises  the  question,  the  transaction  is 
affected  by  B.'s  information.^ 

§  105.  (1)  The  notice  must  be  credible..  It  must  be  of  a 
trustworthy  and  authentic  nature.  Rumor,  or  gossip,  or 
statements  proceeding  from  sources  which  might 
Credibility,  j^j^^^^^^j^^jy  y^^  supposed  inaccuratc,  are  neither  knowl- 
edge nor  notice.  Hearsay  tales  and  idle  talk  can  be  properly 
disregarded,  but  information  of  so  credible  a  nature  that  no 
reasonable  man  would  dare  to  neglect  it  in  his  own  private 
affairs  cannot  be  neglected  by  a  bank  officer  in  the  affairs  of 
the  bank. 

§  106.  (2)  If  the  third  party,  C,  knows  that  A.  has  an 
adverse  interest  tending  to  cause  him  to  withhold  his  knowl- 
Adverse  in-  ^dgc  from  the  bank,  C.  has  no  right  to  regard  A. 
terest.  j^^d  B.  as  identical  in  the  transaction,  and  cannot 

hold  B.  So  one  who  persuades  a  cashier  not  to  impart  his 
knowledge  to  the  bank  cannot  hold  the  bank  affected  by  such 
notice.^ 

1  §  104.  Mayhew  v.  Eames,  3  B.  &  Cress.  601. 
1  §  106.  First  National  Bank  of  Sturges  v.  Keed,  36  Mich.  263. 
230 


WHEN  THE  BANK  HAS  NOTICE.  §  109 

§  107.  (3)  Subject  to  (1)  and  (2)  wo  have  the  following 
rules. 

(a;)  Notice  to  one  whose  business  it  is  to  receive  such  no- 
tice binds  the  bank,  whether  such  agent  has  any  other  duty  to 
perform  in  regard  to  the  matter  to  which  the  notice   Special  ap- 

ji        1         1  T         J  pointmeiit 

relates  or  not.  Any  one  the  bank,  or  directors,  or  or  duty, 
custom,  may  appoint  for  the  very  purpose  of  receiving  notices 
of  course  has  power  in  the  matter,  resting  on  the  same  princi- 
ples as  the  authority  to  do  any  other  act.  For  example,  it  is 
part  of  the  president's  inherent  power  to  receive  notice  of 
suits  against  the  bank. 

§  108.    (?/)  If  Qx)  does  not  apply,  the   next   question  is, 
Did  A.  act  for  the  bank  in  the  business  to  whiclt  the   pj^  the 
notice  relates?^  agent  act? 

If  not,  the  bank  is  not  affected  by  his  knowledge. 

If  he  did  so  act,  then  the  question  is.  When  did  he  receive 
the  information,  and  in  what  capacity  ? 

If  it  came  to  him  officially,  while  acting  in  the  very  business 
which  it  concerns,  it  binds  the  bank,  if  it  came  in  sufficient 
season  to  be  acted  upon.^ 

§  109.  If  notice  comes  to  A.,  as  it  might  to  any  other  in- 
dividual, not  officially  nor  while  acting  for  the  bank  in  the 
business  to  which  it  relates,  as  if  it  is  previous  ^  to  his  employ- 
ment as  agent,  then  the  bank  is  bound,  provided,  — 

1  §  108.  See  Hoover  v.  Wise,  91  U.  S.  308 ;  Commercial  Bank  v.  Cun- 
ningham, 24  Pick.  270  (Mass.). 

2  See  Fairfield  Savings  Bank  v.  Chase,  72  Me.  226;  Bank  of  United 
States  V.  Davis,  2  Hill,  (N.  Y.)  451. 

1  §  109.  See  The  Distillery  Spirits,  1 1  Wall.  856 ;  National  Bank  v.  Ciish- 
man,  121  Mass.  490;  Fairfield  Savings  Bank  v.  Chase,  72  Me.  226;  Anketel 
V.  Converse,  17  Ohio  St.  11;  Hart  v.  F.  &  M.  Bank,  33  Vt.  252;  Blu- 
menthal  v.  Brainard,  38  Vt.  410;  Hayward  v.  National  Ins.  Co.,  52  JMo. 
181;  Dresser  v.  Norwood,  17  C.  B.  n.  s.  466;  Fuller  u.  Beurut,  2  Hare,  402. 
But  Pennsylvania  holds  that  notice  twenty-four  hours  before  the  agency 
is  no  more  notice  to  the  principal  than  if  received  twenty-four  hours 
after  it  ceased.  81  Pa.  St.  256.  Notice  to  an  agent  of  the  bank  is  notice 
to  the  bank  in  transactions  conducted  by  such  agent  acting  for  the  bank, 
within  the  scope  of  his  authority,  whether  his  knowledge  was  acquired  in 
the  course  of  the  particular  dealing,  or  on  some  prior  occasion.  Cragie 
V.  Iladley,  99  N.  Y.  131. 

231 


§  110        OFFICERS   AND   AGENTS. —  GENERAL   PRINCIPLES. 

1st.    That  the  information  is  not  privileged  in  law. 

2d.  That  it  is  so  recent,  and  is  so  circumstanced  in  other 
respects,  as  to  render  it  reasonably  probable  that  it  was  still 
present  in  the  mind  of  A.  when  acting  for  B.  in  the  matter  to 
which  it  relates.  It  would  be  hardly  fair  to  hold  the  bank 
responsible  for  A.'s  failure  to  remember  a  remote  piece  of 
information. 

3d.  That  A.  has  no  interest  adverse  to  communication  of 
his  knowledge  to  the  bank ;  or  if  he  has  such  interest,  that  C.  is 
aware  of  A.'s  possession  of  the  knowledge,  but  not  aware  of  the 
adverse  interest.  If  C.  knows  of  the  adverse  interest,  the  case 
comes  under  §  106.  If  C.  does  not  know  of  the  adverse  inter- 
est, nor  that  A.  has  the  knowledge,  the  knowledge  being  previ- 
ous, the  bank  cannot  be  held  on  the  ground  of  identity  with 
A.  at  the  time  of  receiving  notice,  nor  upon  the  presumption 
that  A.  communicates  for  the  adverse  interest  rebuts  the  pre- 
sum])tion. 

But  although  this  seems  to  be  the  rule  laid  down  by  the 
cases  cited,  it  seems  questionable  whether  in  any  case  B. 
should  be  allowed  to  take  advantage  of  A.'s  bad  faith.  Of 
course  the  responsibility  should  ultimately  fall  upon  A. ;  but 
as  between  B.  and  C,  C.  is  entirely  innocent,  while  B.  has  at 
least  erred  in  judgment  by  selecting  an  agent  whose  conduct  is 
blameworthy.  If  the  loss  by  reason  of  A.'s  bad  faith  must 
rest  upon  either  B.  or  C,  it  seems  clear  that  the  blot  is  on  B.'s 
side  of  the  line ;  his  conduct  in  selecting  a  defective  instru- 
ment has  caused  loss  to  C.  which  would  not  have  resulted  if 
the  instrument  employed  by  him  had  come  up  to  the  standard 
of  good  faith  which  it  is  one  of  the  great  objects  of  the  law  to 
secure  in  commercial  dealings. 

If  the  third  party,  C,  does  not  know  of  the  adverse  interest 
of  the  agent,  A.,  but  does  know  that  A.  has  the  knowledge, 
(which  perhaps  C.  had  himself  imparted  to  A.  before  he  be- 
came agent,  or  while  not  acting  as  agent,)  C.  certainly  has  a 
right  to  consider  that  notice  as  entering  into  the  dealing  be- 
tween them,  just  as  truly  as  if  it  had  come  to  A.  in  the  course 
of  that  very  transaction. 

§  110.  (4)  If  A.  assumes  to  act  as  agent  for  the  bank, 
232 


WHEN   THE    BANK   HAS   NOTICE.  §111 

B.,  and  B.  afterward  adopts  or  takes  the  benefit  of  the  act, 
B.  takes  it  subject  to  notice  of  all  such  matters  as  appear  to 
have  been  at  the  time  within  the  knowledge  and  recollection 
of  A.i 

§  111.  (5)  Notice  to  an  agent  in  regard  to  a  matter  in 
which  he  does  not  act  for  the  hank  is  not  notice  to  the  bank  ; 
nor  if  while  acting  for  the  bank  he  has  information  when  notice 
of  matters  which  do  not  affect  his  own  duties,  nor  [,o['?Xa°^^ 
relate  to  the  bank's  business  in  a  way  that  comes  ^^"^• 
within  the  scope  of  his  employment. 

For  example,  if  one  is  engaged  in  mere  ministerial  duties, 
as  a  clerk  copying  a  deed,  his  knowledge  of  a  former  deed  or 
incumbrance  on  the  land  is  not  notice  to  the  bank.^  If  it  does 
not  concern  a  matter  which  falls  within  the  scope  of  his  real 
or  presumable  agency  and  official  employment,  apparently  he 
is  at  liberty  to  disregard  it,  and  the  bank  cannot  be  injuriously 
affected  by  his  so  doing.  For  the  bank,  having  neither  made 
him  its  agent  nor  held  him  out  as  such  in  these  premises,  is 
bound  by  nothing  which  he  does,  says,  or  hears  therein.  If 
the  cashier  knows  or  learns  something  concerning  a  matter 
exclusively  within  the  functions  of  the  president,  his  knowl- 
edge is  not  the  knowledge  of  the  bank.  In  the  language  of 
the  court  in  the  case  of  The  Fulton  Bank  v.  New  York  and 
Sharon  Canal  Co., "  if  the  notice  be  to  one  who  has  no  duty  to 
perform  relative  to  the  subject  matter  of  the  notice,  it  will  not 
be  enough."  ^  The  words  were  used  in  discussing  notice  to  a 
director,  but  they  state  a  doctrine  of  general  application. 

In  the  case  of  knowledge  acquired  by  or  communicated  to 
any  other  officer  than  a  director,  little  difficulty  can  arise. 
The  president,  it  should  be  remembered,  is  a  director.  But 
his  duty  of  supervision  is  more  extensive  than  that  of  any 
other  member  of  the  board.  Wherefore  notice  to  him  on  any 
subject  would  probably  be  held  to  be  notice  to  the  bank.^ 
Generally  it   may  be  said  that  if   the  notice  relates  to  any 

1  §  110.  Hovey  v.  Blanchard,  13  N.  H.  145. 

1  §  111.  See  remarks  in  Fairfield  Savings  Bank  v.  Chase,  72  Me.  226. 

2  4  Paige,  127. 

8  Porter  v.  Bank  of  Rutland,  19  Vt.  410. 

233 


§112        OFFICERS   AND    AGENTS.  —  GENERAL   PRINCIPLES. 

matter  which  falls  Avithin  the  scope  of  the  agency  and  official 
employment  of  the  officer  to  whum  the  notice  is  given,  then  it 
is  notice  to  the  hank. 

(a)  In  Fairfield  Savings  Bank  v.  Chase,*  Brown,  an  attor- 
ney and  one  of  the  trustees,  was  engaged  to  draw  a  mortgage, 
i.  e.  to  convey  title  to  the  bank,  and  he  knew  there  was  a 
prior  deed  of  the  property  which  failed  to  be  recorded  till 
after  the  mortgage.  It  was  held,  that,  if  Brown  was  acting 
for  the  hank  in  the  matter  of  drawing  the  mortgage,  his 
knowledge  was  notice  to  the  bank,  but  as  the  evidence  on  this 
point  was  doubtful,  it  should  have  gone  to  the  jury,  and  as 
it  did  not,  the  verdict  was  set  aside. 

§  112.  (G)  Notice  to  a  single  Director. —  It  has  been  held 
that  each  member  of  the  board  of  directors  is  the  agent  of 
the  bank  to  receive  notice,  and  if  he  acts  in  the  matter,  al- 
though only  one  of  a  large  majority,  the  others  all  acting 
honestly  and  without  notice,  actual  or  constructive,  yet  the 
knowledge  of  the  one  director  binds  the  bank  as  much  as  if 
he  were  a  sole  agent,  doing  the  business  alone.^ 

It  is  a  question  whether  it  is  just,  in  case  of  a  composite 
agency  like  the  board  of  directors,  to  hold  the  bank  bound  by 
the  knowledge  of  one,  any  more  than  by  the  other  individual 
conduct  of  one.  Since  the  power  and  agency  is  in  the  hoard, 
and  is  not  intrusted  to  individuals,  it  would  seem  proper 
that,  to  affect  the  bank,  the  knowledge  should  be  that  of 
the  hoard,  or  of  so  many  that  its  action  would  not  stand 
after  taking  away  the  votes  of  those  having  notice.  The 
directorial  act  should  involve  the  notice,  the  knowledge  should 
enter  into  and  taint  the  cause  of  the  bank's  conduct,  in  order 
to  vitiate  it.     See  §  114. 

(a)  In  Louisiana  State  Bank  v.  Senecal,^  the  court  thought 
it  reasonable  that  there  should  be  formal  notice  to  the  board, 
or  at  least  that  the  majority  of  the  directors  should  be 
affected.      This   perhaps    is   going  as  far  the  other  way  in 

4  72  Me.  220  (1881). 

1  §  112.  North  River  Bank  v.  Aymar,  3  Hill,  (N.  Y.)  262;  Bank  of 
United  States  v.  Davis,  2  id.  451. 

2  13  La.  527. 

234 


NOTICE   TO    A   SINGLE   DIRECTOR.  §  112 

statement,  though  the  thought  of  the  court  was  probably 
really  directed  to  the  point  of  causation  which  we  are 
noticing. 

An  individual  director,  unless  specially  authorized,  is  not 
the  agent  of  the  bank  to  do  any  Ijusiness ;  he  is  simply  one 
member  of  a  composite  agency,  that  must  act  as  a  unit  to 
bind  the  bank. 

For  this  reason  the  argument  used  above  in  §  108  to  en- 
force the  liability  of  the  bank  where  A.  is  guilty  of  bad  faith, 
though  in  regard  to  previously  acquired  information,  does  not 
apply  here.  The  instrument  used  by  the  bank  is  the  board 
as  a  unit,  and  unless  the  board  as  a  unit  is  affected  with  bad 
faith  the  transaction  is  pure.  If  an  officer  acts  with  due  care 
and  in  good  faith,  it  cannot  make  his  conduct  anything  but 
morally  and  legally  good  and  proper  because  some  one  who  is 
acting  dishonestly  may  give  him  advice. 

Suppose  a  director  (D.)  has  knowledge  and  stays  away 
from  the  meeting,  and  the  board  votes  by  five  majority  to 
do  a  certain  thing  to  which  D.'s  notice  relates,  the  cases  are 
clear,  the  bank  is  bound.  Now  suppose  he  takes  his  seat, 
and  there  is  a  majority  of  six,  an  honest  majority  of  five,  how 
is  the  bank's  action  vitiated?  Or  suppose  he  goes  further, 
and  argues  for  the  resolution ;  the  others  have  a  right  to  hear 
argument  from  any  source,  and  weigh  it  candidly  ;  if  they  are 
really  honest,  the  vote  is  still  untainted.  If  there  is  one 
white  hair  in  a  beard,  it  is  hardly  correct  to  say  the  beard  is 
white,  and  fraud  in  the  vote  of  a  single  town  will  not  vitiate 
the  election  of  a  President  of  the  United  States. 

(6)  Still,  the  law,  in  order  to  avoid  troublesome  inquiry 
and  prevent  the  possibility  of  fraud,  is  in  the  habit  of  drawing 
broad  lines  beyond  all  the  doubtful  territory,  and 
so  it  may  continue  to  be  law  that  knowledge  of  a 
single  director  acting  in  the  business  for  the  bank  while  pos- 
sessing such  notice  is  sufficient  to  bind  the  bank;  although 
strict  justice  would  require  no  more  than  that,  when  it  is 
shown  that  one  director  had  notice,  the  burden  of  proof 
should  be  on  the  bank  to  show  that  the  action  of  the  board 
was  not  determined  by  that  director. 

235 


§113        OFFICERS    AND    AGENTS. —  GENERAL   PRINCIPLES. 

Note  on  the  Competexcy  of  Bank  Officials  and  Shareuolders 
AS  Witnesses  on  Bank's  Behalf. 

§  113.  It  may  now  be  laid  down,  in  general  terms,  that  the  officer  or 
agent  of  the  bank  is  a  competent  witness  in  its  belialf,  even  concerning 
a  transaction  which  he  himself  conducted,  or  in  which  he  was  interested 
or  engaged.  In  such  cases  it  must  frequently  liappen  that  the  officer  or 
agent  will  be  personally  and  closely  interested  in  the  determination  of  the 
litigation.  For  if  the  bank  should  fail  of  success  by  reason  of  any  inac- 
curacy, irregularity,  or  wrongfulness  in  his  proceedings,  it  must  be  antici- 
pated as  a  natural  result  that  he  will  himself  be  sued  by  the  bank,  either 
upon  his  official  bond  or  his  common  law  liability,  and  held  to  answer  for 
the  consequences  of  his  default,  besides  suffering  all  the  collateral  mischief 
of  a  loss  of  his  position  and  reputation.  The  latter  fact,  of  course,  could  not 
operate  to  render  him  incompetent,  but  must  be  confined  to  affecting  his 
credibility.  The  former  fact  however,  goes  directly  to  the  question  of  his 
competency.  It  is  not  to  be  supposed  that  the  extension  of  the  exception 
to  the  general  rule  to  cover  these  cases  has  been  allowed  to  take  place 
without  opposition.  But  the  several  decisions  have  been  uniformly  in 
favor  of  the  admission  of  the  testimony,  so  that  the  matter  must  at  last 
be  regarded  as  definitively  settled  according  to  the  above  doctrine. 

(a)  The  simplest  class  of  cases,  thosfe  in  which  the  objectors  to  the 
competency  certainly  had  but  very  little  ground  to  stand  upon,  were  those 
wherein  the  officer  or  agent  had  been  formally  and  sufficiently  released  by 
the  bank  from  all  manner  of  claim  which  it  might  have  against  him,  even 
if  he  should  appear  to  have  been  in  default.  No  difficulty  seems  to  have 
been  experienced  in  disposing  of  these  in  favor  of  the  admissibility. ^ 
The  next  step  in  advance  was  taken  in  the  cases  in  which  some  possible 
question  might  arise  as  to  any  liability  of  the  officer  or  agent  to  the  bank. 
But  admitting  a  possibility  that  he  might  be  held  by  the  bank,  yet  this 
was  by  no  means  equivalent  to  the  established  fact  that  he  certainly 
could  be  so  held.  It  was  an  assumption,  which  might  so  obviously  prove 
erroneous,  that  the  court  could  not  be  expected  to  make  it.  The  contin- 
gent impropriety  of  receiving  the  testimony  could  not  be  allowed  to  have 
equal  effect  with  a  positive  impropriety.  So  again  in  these  cases  the  nar- 
row question  of  intrinsic  competency  was  evaded,  and  the  evidence  was 
admitted  as  it  were  through  a  side  door.^  But  it  was  not  of  course  always 
possible,  however  much  the  courts  might  have  wished  it  to  be  so,  thus  satis- 
factorily to  flank  the  main  position  of  the  objectors.  Sooner  or  later  the 
question  of  the  intrinsic  competency  of  such  persons  as  witnesses  must 
arise,  and  must  be  decided  fairly  upon  its  own  merits;  and  it  having  finally 

1  §  113.  Farmers  &  Mechanics'  Bank  v.  Champlain  Transportation  Co., 
18  Vt.  131;  23  id.  180;  Johnson  v.  Farmers'  Bank,  1  Harr.  117. 

2  Franklin  Bank  v.  Freeman,  16  Pick.  535;  Union  Bank  v.  Knapp,  3 
id.  96. 

236 


COMPETENCY   OF   OFFICERS.  §  113 

arisen  in  various  States,  the  courts  of  each,  thus  far  without  an  exception, 
have  decided  to  admit  the  testimony  offered.  The  Supreme  Court  of  the 
United  States  and  the  text-books  on  evidence  have  adopted  the  same  rule.^ 
The  obvious  necessity  of  the  case  has  conquered  all  less  objections.  It 
must  be  that  an  officer  should  be  allowed  under  oath  to  state  what  he  had 
done;  since  otherwise  the  bank  was  so  utterly  tongue-tied  that  it  must 
fall  an  inevitable  sacrifice  to  the  most  unworthy  plaintiff,  and  furnish  an 
obvious  temptation  to  dishonest  suits. 

Shareholders  as  Witnesses. 

(h)  A  shareholder  in  the  bank,  by  assigning  away  his  stock,  may  render 
himself  a  competent  witness  in  its  behalf.  Neither  is  it  too  late  for  him 
to  make  the  assignment  after  the  suit  has  been  begun.^  If  a  statute  of  the 
State  in  which  the  bank  is  incorporated  declares  stockholders  to  be  liable 
to  the  holders  of  notes  of  the  bank  in  case  of  the  insolvency  of  the  corpo- 
ration, the  contingent  liability  under  this  law  of  one  who  has  at  any  pre- 
vious time  been  a  stockholder  will  not  impair  his  competency  as  a  witness. 
His  interest  in  the  affairs  and  prosperity  of  the  bank  is  too  remote  to  be 
permitted  to  have  this  effect,  at  least  unless  there  is  some  evidence  of 
inability  on  the  part  of  the  bank  to  meet  its  liabilities.^ 

8  United  States  Bank  v.  Stearns,  15  "Wend.  314;  Farmers  &  Mechanics' 
Bank  v.  Champlain  Transportation  Co.,  18  Vt.  131;  Huntress  v.  Patten, 
20  Me.  28;  Jackson  v.  Bank  of  the  United  States,  10  Pa.  St.  Gl;  2  Starkie 
on  Evidence,  753,  767,  768,  n.  2;  1  Greenleaf  on  Evidence,  416,  417;  Cook- 
endorfer  v.  Preston,  4  How.  (U.  S.)  317;  Franklin  Bank  j'.  Freeman,  16 
Pick.  535.     See  also  Wiggin  v.  Freewill  Baptist  Church,  8  Met.  301. 

4  Meighen  v.  Bank,  25  Pa.  St.  288. 

5  Ibid.;  citing  also  Willing  v.  Cousequa,  1  Pet.  301;  Curcier  v.  Pen- 
nock,  14  Serg.  &  R.  51 ;  Irwin  v.  Lumberman's  Bank,  2  Watts.  &  S.  190. 

237 


CHAPTER  IX. 

DIRECTORS. 

§  114.   Analysis. 

§  115.   Division  op  Management.     Tlic  Lank  may  divide  the  management 
among  several  boards  or  committees. 
Authority. 

§  lie.  Management  and  superintendence.     They  are  the  brains,  judgment, 

discretion,  of  the  bank ;  they  can  delegate  the  execution  of  their 
decisions  and  limited  discretion  in  small  matters,  but  not  discre- 
tion in  weighty  matters.     §§  143,  151. 

§  117.  Allowing  discounts  is  an  exclusive  power  of  the  board,  though  the 

execution  may  be  delegated,  as  by  giving  the  casliier  authority 
to  discount  for  a  certain  person  to  a  certain  amount. 
Allowing  overdrafts  is  also  an  exclusive  function.     §§  357,  358. 

§  118.  Execution  of  daily  routine  is  not  a  part  of  the  management. 

§  119.  Tliej'  may  release  a  debt  due  the  bank  if  they  tiiink  it  best  for  the 

bank's  interest. 

§  120.  The3'  may  pledge  or  assign  property  of  the  bank  to  pay  or  secure 

creditors,  just  as  an  individual  may. 

§  121.  Issuing  bank  bills  when  the  bank  has  the  right  is  an  exclusive  func- 

tion of  the  board. 

§  122.  Directors  may  arrange  with  other  banks  for  collection,  redemption 

of  bills,  transfer  of  stock,  &c. 

§  123.  They  may  remove  the  president,  or  any  other  officer. 

§  124.  The  power  of  directors  rests  in  them  as  a  board,  not  as  individuals. 

In  the  absence  of  express  provision,  a  majority  is  a  quorum,  and 
a  majority  of  a  quorum  at  a  legal  meeting  is  necessary  to  bind 
the  bank.  No  individual  director  has  authority  to  bind  the  bank 
by  his  representations  or  statements,  but  he  may  make  himself 
liable  for  misrepresentation,  or  slander,  or  libel. 
Duty.     §  163. 

§  125.  Directors  must  show  a  reasonable  capaciti/  for  their  position,  must 

exercise  discretion  and  industry  in  good  faith,  and  must  obey  the 
directions  of  tlie  charter  and  organic  law.  They  are  trustees, 
owing  their  first  duty  to  the  public,  so  far  as  concerns  the  circu- 
lating notes  of  the  bank  (if  it  has  any),ne$t  to  the  depositors,  and 
then  to  the  stockholders ;  and,  in  common  with  all  persons  acting 
in  a  fiduciary  capacity,  it  is  their  duty  not  to  acquire  any  interest 
adverse  to  that  of  the  bank,  nor  to  make  an}'  profit  from  their 
employment. 

238 


DIRECTORS.  §  114 

§  126.  It  is  their  duty  to  repudiate  the  wrongful  acts  of  subordinate  offi- 

cers, and  to  discharge  a  guilty  one. 
§  124.  Tliey  should  see  that  their  fellow  directors  are  properly  notified  of 

meetings. 
No  Power. 
§  127.  They  have  no  power  to  increase  the  capital  or  to  work  any  or- 

ganic change.     §  144. 
They  cannot  release  a  shareholder  from  his  liability.     §  671. 
§  125.  They  cannot  make  a  profit  for  themselves  from  their  trust,  except 

such  as  is  common  to  all  stockholders,  nor  make  a  contract  in 
which  they  have  an  adverse  interest. 
§  127.  They  cannot  give  away  the  bank's  property.     Their  discretion  is 

limited  to  conducting  the  affairs  of  the  bank  so  as  to  increase  its 
profits,  and  to  enhance  the  value  of  its  property  intrusted  to  them 
in  the  pursuance  of  legitimate  banking  business.  They  cannot 
make  the  bank  an  accommodation  indorser  nor  a  gratuitous  surety 
in  any  way. 
§  116.  They  cannot  delegate  discretion  in  important  matters. 

Nor  acquire  adverse  interest  to  bank ;  but  if  a  director  votes  in  a 
matter  improperly,  the  bank  will  still  be  bound  to  innocent  third 
parties.     §  127  c. 
Liability.     §§  79,  129,  147,  717  c ;  II.  §§  53,  153. 
To  the  bank  or  shareholders. 
§  128.  For  any  loss  by  reason  of  their  incompetence,  bad  faith,  or  neg- 

ligence of  duty.  But  an  error  of  judgment,  such  as  any  one 
of  reasonable  capacity  might  make,  or  an  innocent  mistake 
of  fact,  is  an  excuse.  Ignorance,  however,  of  anj*  fact  which 
reasonable  diligence  in  the  discharge  of  duty  would  have 
brought  to  knowledge  is  not  innocent.  Ill  health  is  held  no 
excuse  for  such  ignorance. 
Only  the  directors  who  cause  the  damage  are  liable,  though  in 

Georgia  it  is  held  otherwise.     §  130  d,  e. 
In  some  States  the  law  provides  how  dissenting  directors  may 

avoid  liability. 
For  incurring  debt  beyond  the  legal  limit. 
For  loan  beyond  limit. 
For  wrongful  issue  of  bills. 
§  129.  A  bank's  claim  against  a  director  for  dishonesty,  negligence, 

or  incompetency  is  assets  in  the  hands  of  a  receiver. 
To  third  parties.     II.  §§  53,  153. 
§  130.  In  absence  of  statute  provision,  directors  are  not  liable  to  third 

persons  dealing  with  the  bank  for  damage  caused  b}-  their 
mismanagement,  unless  their  conduct  is  grossly  negligent,  or 
malicious,  or  fraudulent.  Their  contract  is  with  the  bank. 
If  a  director  misrepresents  or  makes  a  contract  binding  on 
himself,  or  is  guilty  of  tort  in  any  way,  he  is  of  course  liable, 
as  is  any  other  individual  or  agent.  Every  one  assisting  in 
a  wrong,  as  in  making  deceiving  statements  in  corporate  re- 
ports, is  personally  liable,  unless  a  mere  instrument. 

239 


§  114  DIRECTORS. 

Oke  allowing  himself  to  be  held  out  as  a  Director.    §  148. 
§  131.  Is  liable  to  one  misled  by  his  conduct,  and  perhaps  to  all  who  could 

hold  him  if  he  were  a  real  director,  even  though  not  knowing  of 
the  holding  out. 
When  a  Bank  is  made  liable  by  the  Condcct  of  Directors.    §  79. 
An  individual  director,  as  such,  has  no  power  to  make  the  bank 
liable  in  any  way. 
Contract. 

(1)  Whenever  the  board  (as  such,  §  124)  undertakes  to  contract  for  the 

bank  in  a  way  that,  so  far  as  may  be  ascertained  by  any  facts 
§127.  Director  voting  •I'^tually  or  constructively  known  to  C.  (the  party 

in  case  he  is  between  whom  and  the  bank  the  controversy  on  the 
adversely'  in-  "^ 

terestod.  contract  arises),  is  within  the  scope  of  their  powers 

§§  125  6, 127  c.  and  duty  as  the  managing  body  in  the  bank's  busi- 
ness, it  is  the  contract  of  the  bank  as  to  C.  If  really  intra  vires, 
the  bank  is  of  course  bound ;  if  ultra  vires,  it  may  or  may  not  be 
bound.     See  Ultra  vires. 

(2)  If  the  board  undertakes  to  contract,  and  C,  whoso  right  is  in  ques- 

tion, did  know  or  ought  to  have  known,  as  matter  of  law,  upon  the 
facts  of  which  he  had  notice,  that  they  were  going  beyond  the 
scope  of  their  agency,  their  act  is  not  that  of  the  bank  as  to  C. 

(3)  Any  action  of  the  board  authorizing  or  ratifying  the  contract  of 

any  other  ofHcer  is  governed  by  the  same  consideration.  Their 
action  is  that  of  the  bank  if  really  valid,  or  if  C.  has  a  right  to 
deem  it  so. 

(4)  Declarations  of  directors.     See  §103  a. 
Tort.    §§  147,  172. 

§  132.  Under  the  principles  of  §  102,  the  bank  is  liable  for  the  tort  of  the 

board,  or  of  a  subordinate  officer  authorized  or  ratified  by  the 
board,  e.  g.  libels  and  false  statements  in  corporate  reports. 
§  126.  If  the  directors  knowingly  allow  the  bank  to  take  the  benefit  of 

the  wrong  of  an  officer,  or  retain  him  in  the  bank's  service,  or 
otherwise  adopt  his  act,  the  bank  will  be  liable. 
Forfeiture.    §  722. 
§  126.  Any  act  of  the  board  which  upon  the  facts  known  to  them,  or  which 

ought  to  be  known  to  them  by  reasonable  diligence,  is  in  viola- 
tion of  the  law  governing  the  bank,  may  cause  forfeiture ;  and  if 
they  authorize  such  breach  of  law  by  a  subordinate  officer,  or 
if  they  knowingly  allow  the  bank  to  get  the  benefit  of  such  an  act, 
or  retain  the  wrongdoer  in  the  bank's  service,  or  otlierwise  adopt 
or  ratify  his  conduct,  it  will  make  the  bank  liable  to  forfeit- 
ure. II.  §  35. 
Crime. 

Though  outside  our  subject,  wc  may  note  that  the  board  may  make 
the  corporation  liable  to  indictment,  as  by  authorizing  a  public 
nuisance  or  publishing  a  libel. 
Notice.    §9,  n.  9;  §  166. 

Knowledge  (such  as  a  man  of  ordinary  prudence  would  regard  in 
his  own  affairs). 

240 


DIRECTORS.  §  114 

§  133.  Of  the  Boakd,  by  open  mention  or  discussion  at  a  tnceting, 

or  what  they  shouhl  know  by  due  diligence  in  discharge 
of  their  trust,  binds  tlie  bank  as  to  third  parties  (except 
sureties  on  an  officer's  bond,  q.  v.). 
Of  a  single  Directok. 

Constructive  knowledge  of  a  single  director  does  not  bind 

the  bank. 
As  to  actual  knowledge,  the  rules  are  as  follows. 
§§  134-136.    The  Bank  is  not  bound  by  notice  to  one  director. 

(a)  (1)  If  the  third  party  (C.)  knows  I),  has  adverse  interests. 

(2)  If  D.  is  not  specially  appointed  to  receive  such  notice,  and  did 
rot  act  for  the  bank  in  the  matter  to  which  it  relates,  or, 
if  he  did  act,  but  the  knowledge  was  gained  previous  to 
or  outside  of  the  agency,  and  he  has  an  adverse  interest, 
or  the  information  is  not  fairly  to  be  presumed  still  present 
in  his  mind  at  the  time  of  the  agency  in  the  matter  to  which 
it  relates. 
(6)  The  Bank  is  bound  when  (a)  (1)  does  not  apply,  in  four  cases. 

(1)  If  D.  is  specially  authorized  to  receive  the  notice. 

(2)  If  he  is  acting  for  the  bank  in  the  matter  to  which  the  notice 

relates  at  the  time  of  receiving  it. 

(3)  If,  after  receiving  the  notice  in  any  manner,  he  acts  for  the 

bank  in  the  matter  with  the  information  still  presumably  in 
his  mind  and  without  adverse  interest. 

(4)  If  he  acts  with  such  information  presumably  present,  even 

though  he  has  an  adverse  interest,  if  this  fact  is  not  known 
to  C.  and  the  fact  of  his  having  the  knowledge  is  known 
toC. 
§  137.       (c)  A  director  is  as  an  individual  chargeable  with  his  own  knowl- 
edge, actual  or  constructive,  of  course,  but  it  is  not  a  conclu- 
sive presumption  that  he  knows  all   the  details  of  the   bank 
business. 
Eights, 

Unless  prohibited, 
§  125.  Way  take  a  loan  from  the  bank,  but  must  not  act  at  the 

granting  of  it. 
§  124.  Each  has  by  his  office  a  right  to  scrutinize  all  the  affairs 

of  the  bank,  to  have  notice  of  meetings,  and  to  have 
access  to  the  bank  books,  &c. 
§  138.  Qualifications.     II.  §§  9,  10. 

Frequently  required  to  own  a  prescribed  number  of  shares  in 
the  bank  to  identify  its  interests  with  their  own. 
Continuance  in  Office. 
§  13^).  Bankruptcy  does  not  vacate  the  office,  but  circumstances  may 

show  abandonment. 
§  140.  Pay  of  Directors.     §  150. 

§  141.  Records. 

De  facto  Directors.     See  §  98  b. 
VOL.  1.  16  241 


§  116  DTUECTORS. 

§  115.  Division  of  Management.  —  It  has  been  held,  that 
a  banking  corporation  may  divide  the  total  of  its  business 
Mav  divide  ^"*°  various  distiuct  departments,  choosing  a  sep- 
Tiianafrcniftnt   aratc  boavd  of   directors   to  have  control  of  each 

ainiiiif;  sev- 
eral boards  or  respectively.      Or  it  mav  have  but  one  board,  and 
committees.       ,..,.,.".  ., ,'  <>        •  i 

divide  it  into  committees,  conierring  upon  each 
committee  supreme  power  in  its  appropriate  department. 
Then  the  resolutions  of  each  committee  within  the  scope  of 
the  business  allotted  to  it  will  be  equivalent  to  and  of  the 
same  effect  as  similar  resolutions  of  the  entire  board.^  But 
in  the  latter  case  the  powers  intended  to  be  exercised  by  each 
committee  should  be  distinctly  conferred  upon  it,  as  in  any 
other  case  of  delegation  of  authority.  The  mere  nomination 
of  two  or  three  among  the  directors  to  constitute  a  "  finance 
committee,"  may  impose  duties  or  especial  watchfulness  and 
supervision  upon  them,  but  without  some  further  delegation 
of  real  power  to  them  it  does  not  give  them  the  supreme  con- 
trol and  management  of  all  the  financial  transactions  and 
business  of  the  bank.  Their  duties  rather  than  their  powers 
are  enlarged.  The  intent  to  increase  the  authority  which 
they  already  have,  if  individual  directors  can  be  properly  said 
to  have  any  authority  at  all,  must  be  expressed  in  some  more 
clear  and  precise  manner  than  by  the  simple  act  of  giving 
the  name  of  "  finance  committee"  to  A.  B.  and  C.  D.  out  of 
the  whole  number  of  the  board.  So  it  was  held  in  New 
York  that  the  president,  cashier,  and  "  finance  committee  " 
of  the  board  could  not  mortgage  corporate  real  estate  without 
the  concurrence  of  the  board  of  directors ;  although  practi- 
cally the  president  and  cashier  had  been  wont  to  exercise 
very  large  authority  and  discretion  in  the  management  of  the 
bank's  affairs.  The  finance  committee  as  such  enjoyed  no 
extraordinary  power.^ 

§  116.  Board  of  Directors. — General  Functions.  —  The  gen- 
General  man-  era!  control  and  government  of  all  the  affairs  and 
supSen-"^  transactions  of  the  bank  rest  with  the  board  of  di- 
dency.  rcctors.    For  such  purposes  the  board  constitutes 

1  §  115.    Palmer  v.  Yates,  3  Sandf.  137. 

'  Leggett  V.  New  Jersey  Banking  Co.,  Saxt.  541. 

242 


FUNCTIONS   AND    POWER   OF   DELEGATION.  §  116 

the  corporation,  may  act  as  the  coi-poratiuu,  and  pj.pjyj.iy 
unless  specially  restricted  may  with  few  exceptions  fimctions. 
(see  §  127)  exercise  all  the  powers  which  the  cor- 
poration is  authorized  at  common  law,  or  under  the  charter  or 
organic  law,  to  exercise.  Organic  banking  laws  and  charters 
customarily  confer  upon  the  board  in  broad  phraseology  the 
general  power  to  conduct  and  manage  the  corporate  business. 
But  this  language  is  practically  only  a  recognition  of  the  func- 
tions which  the  board  would  be  entitled  and  called  upon  to 
exercise  by  the  rules  of  common  law,  and  does  not  oper- 
ate to  enlarge  those  functions,  or  to  designate  them  with 
any  greater  particularity.  Neither  can  the  duty  thus  con- 
ferred be  construed  as  a  requisition  upon  the  directors  to 
undertake  the  performance,  in  person,  of  all  the  acts  called 
for  by  the  daily  routine  of  the  business  of  the  bank.  It 
extends  to  such  matters  only  as  are  usually  and  conveniently 
allotted  to  the  charge  of  directors  in  the  banking  business. 
Some  such  acts  they  must  perform ;  others  they  may  perform. 
But  the  obligation  is  measured  by  a  uniform  usage  prevail- 
ing among  banks  universally.  Their  personal  execution  may 
be  restricted  to  the  matters  thus  designated,  unless  others  be 
specifically  named  or  added  in  the  law.  Besides  a  variety  of 
specific  acts  which  they  must  initiate  or  wholly  do,  this  uni- 
form usage  imposes  upon  them  the  "  general  superintendence 
and  active  management "  of  the  corporate  concerns.  They 
are  bound  to  know  all  that  is  done,  beyond  the  merest  matter 
of  daily  routine ;  and  they  are  bound  to  know  the  system  and 
rules  arranged  for  its  doing.  So,  though  it  has  been  said  that 
powers  of  a  public  character  given  by  the  legislature  to  any 
body  of  individuals  can  never  be  sub-delegated  by  ^j^^^^j  * 
the   recipients,   yet   this  doctrine  has  never  been   gate  matters 

IT  r  '  ""*  involv- 

allowed  to  prohibit  bank  directors  from  appointing   ing  weighty 
agents  and  endowing  them  with  sufficient  powers 
for   executing   the    resolutions    of   the    board,   and    carrying 
on,  without   specific  authority  in  each   individual  case,  the 
ordinary   transactions  of   daily   business.^ 

1  §  116.    Buriill  V.  Nahant  Bank,  2  Met.  163 ;   Ridgway  v.  Farmers' 
Bank,  12  Serg.  &  R.  256. 

243 


§  116  DIRECTORS. 

The  board  may  authorize  the  president  or  cashier,  or  both, 
to  borrow  money,  indorse  the  notes  of  the  bank,  or  obtain  u 
discount  for  the  benefit  of  the  bank.^  Accordingly  they  may 
delegate  to  a  committee  of  their  own  number,  power  to  mort- 
gage real  estate  of  the  corporation,  including  as  a  necessary 
implication  power  to  execute  and  deliver  the  ordinary  and 
proper  instruments.^  Although  dealings  in  real  estate  are 
of  the  most  dignified  and  formal  character  of  any  dealings 
in  the  eye  of  the  law,  yet  general  supervision  even  of  these 
satisfies  the  duty  of  the  board.  All  beyond  this  may  be  dele- 
gated. They  may  empower  the  president  alone,  or  the  presi- 
dent and  cashier  conjointly,  to  borrow  money  on  behalf  of 
the  bank,  to  indorse  its  promissory  notes,  to  obtain  discounts 
for  its  use  ;  these  powers  also  including  the  power  to  make 
delivery  of  the  paper  thus  negotiated.  It  seems  also  that 
these  powers  may  be  conferred  not  only  by  a  special  vote 
passed  with  a  view  to  a  single  occasion,  but  also  by  a  general 
resolution  looking  to  their  frequent  exercise  on  various  occa- 
sions.^ But  votes  of  this  broad  nature,  unless  very  cautiously 
indulged  in,  are  likely  often  to  be  improper  and  in  some  de- 
gree unsafe.  For  if  they  ap}jear  to  go  too  far  in  throwing 
within  the  discretion  of  others  the  decision  of  weighty  mat- 
ters covering  a  wide  ground  of  responsibility,  they  would 
amount  to  an  effort  in  a  measure  to  delegate  the  "  manage- 
ment "  of  the  business  of  the  bank.  To  this  extent  the  board 
of  directors  cannot  go.  Within  reasonable  and  moderate 
limits,  so  narrow  that  their  general  supervision  must  practi- 
cally cover  all  which  their  delegates  can  do  within  these 
limits,  they  may  confer  powers  by  a  general  resolution,  which 
may  be  valid  for  an  indefinite  period  and  for  any  number  of 
separate  transactions.  But  authority  so  large  as  to  transfer 
in  an  im])ortant  degree  the  control  of  the  corporate  affairs 
they  cannot  confer. 

2  Fleckner  v.  Bank  of  the  United  States,  8  Wheat.  355. 

8  Buriill  V.  Niihant  Rank,  2  Met.  163. 

*  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  256;  Merrick  v.  Bank  of 
the  Metropolis,  8  Gill,  59 ;    Fleckner  v.  Bank  of  the  United  States,  8 
Wheat.  338. 
244 


DISCOUNTS.  §  117 

§  117.  Thus  the  making  of  discounts  is  an  inalienable 
function  of  the  directors.  They  cannot  part  with  it,  or  in- 
vest any  officer  or  officers  with  it.  It  rests  in  Allowing 
them  alone  and  exclusively.  It  is  a  power  of  ci'usi*v"e"^^^^ 
that  degree  of  vital  importance  that  it  cannot  be  nVa^.*^{Je^eie 
taken  out  of  the  policy  of  the  general  principle  gated, 
that  powers  of  a  public  nature,  given  by  the  legislature, 
cannot  be  sub-delegated.^  The  legislature  imposes  upon  the 
board  the  duty  of  taking  charge  of  all  those  matters  of  busi- 
ness upon  the  wise  and  skilful  conduct  of  which  the  pros- 
perity of  the  institution  and  the  safety  of  persons  dealing 
with  it  depend.  This  duty  they  cannot  shift  in  whole  or  in 
part  upon  others,  and  it  covers  no  department  of  banking 
business  more  unquestionably  than  the  making  of  loans  and 
discounts.  The  case  cited  below.  Bank  Commissioners  v. 
Bank  of  Buffalo,  if  carelessly  read,  might  seem  to  give  the 
directors  power  to  confer  upon  the  financial  officer  of  the 
bank  a  general  authority  to  discount.  But  a  more  careful 
examination  serves  to  show  that  quite  the  contrary  was  in- 
tended, and  that  the  case  really  illustrates  the  doctrine  of  the 
last  preceding  paragraph.  The  board  may  give  the  financial 
officer  by  a  single  resolution  power  to  make  a  considerable 
number  of  discounts  or  loans,  provided  they  be  requested. 
But  this  single  resolution  must  name  the  person  or  persons 
to  whom  the  loans  may  be  made,  the  aggregate  sum  which 
they  must  never  exceed,  the  time,  and  such  other  particu- 
lars as  the  directors  may  deem  of  moment.  Thus  in  fact 
though  many  separate  acts  may  be  authorized  by  tliis  one 
vote,  yet  nothing  is  really  done  beyond  the  supervision  of  the 
directors,  or  without  the  active  exercise  of  their  discretion. 
They  may  order  the  cashier  to  let  A.  have  such  loans  as  he 
shall  wish,  in  such  sums  and  at  such  times  as  he  shall  ask, 
within  a  certain  period,  up  to  the  amount  of  a  designated 
sum,  to  run  for  specified  times,  at  rates  of  interest  named, 
and  upon  designated  conditions  concerning  indorsers  or  collat- 
eral security.  This  docs  not  leave  each  individual  discount 
made  to  A.  to  be  passed  upon  by  the  directors ;  yet  in  fact 
J  §  117.    Lyon  v.  Jerome,  26  Wend.  485. 

245 


§  119  DIRECTORS. 

no  discount  is  made  to  him  by  any  official  authority  other 
tlian  that  of  the  hoard,  or  at  the  substantial  discretion  of  any 
person  save  the  directors.  Such  is  unquestionably  the  real 
thread  of  legal  principle  which  runs  tlirough  the  cases  cited 
in  this  and  the  next  preceding  paragraph.  It  alone  can  make 
them  intelligible  and  consistent  witli  established  rules.''' 

§  118.   The  ordinary  executory   functions   of  the  various 
officers  of  the  bank  are  not  necessarily  affected  by  the  statu- 
tory delegation  of  the  management  of  all  corporate 
functions  not  affairs  to  tlic  board.      Management  is  not  identi- 

niauagument.         i       ■  i  •  t     t  .  t 

cal  with  execution,  and  does  not  intend  execution. 
Checks  arc  drawn,  notes  and  bills  indorsed,  deposits  received, 
drafts  paid,  and  the  like  transactions  conducted,  as  matter  of 
course,  by  the  appropriate  customary  officers  without  any 
authorizing  vote  of  the  directorial  board.  These  matters 
do  not  constitute  the  "  management "  of  the  bank,  nor  inter- 
fere with  the  "  control "  of  its  affairs.  They  are  properly  the 
medium  through  which  that  management  and  control  are 
introduced  into  the  practical  transactions. 

§  119.  As  a  rule,  they  cannot  voluntarily  release  a  debt 
owing  to  the  company ;  ^  but  where  the  emergencies  of 
May  some-  busiucss  require  it,  they  may  make  a  nominal 
debt^'^make  ^^'  i^icrcly  apparent  sacrifice  of  bank  property, 
a  compromise,  if  j^  sccms  reasonably  likely  to  redound  to  the 
substantial  benefit  of  the  institution.  In  the  bona  fide  pur- 
suit of  this  end,  their  power  is  not  limited  by  technical 
restrictions  which,  under  other  circumstances,  would  for- 
bid their  cancelling  debts  owing  to  the  bank.  The  case  of 
Baird  v.  Bank  of  Washington^  shows  that  they  may  commute 
a  debt  if  it  seems  to  them  practically  more  advantageous  to 
do  so  than  it  would  probably  be  to  push  it  at  law,  or  to 
retain  the  naked  legal  claim  for  the  full  amount.  In  like 
manner,  if  any  officer  of  the  bank  is  in  arrear  or  default,  it 
is  perfectly  in  their  power  to  compound  and  settle  with  him 

2  Bank  of  the  United  States  v.  Dunn,  6  Pet.  51 ;  Bank  Commissioners 
V.  Bank  of  Buffalo,  6  Pai^e,  497;  Percy  v.  Millaudon,  3  La.  568. 

1  §  119.    Stanhope's  Case,  3  De  G.  &  Sm.  198. 

2  11  Serg.  &  R.  411. 

246 


RELEASING   CLAIMS.  §  119 

ill  any  manner  and  upon  any  terms  which  seem  to  them 
liivcly  to  secure  the  most  complete  reimbursement  to  the 
bank.  Their  contract  of  this  nature  can  be  subsequently 
avoided  by  the  bank,  solely  on  the  ground  uf  further  fraud 
or  dishonesty  of  the  compounding  ollicer  occurring  in  the 
negotiation  itself.^ 

Again,  it  not  unfrequently  occurs  that  the  wrongful  or 
erroneous  act  of  an  officer  causes  a  loss  to  the  bank  which 
he  can  be  held  liable  to  reimburse,  but  which  there  is  reason 
to  believe  can  only  be  recovered  by  a  suit  against  some  other 
third  party.  But  if  recourse  is  had  to  the  suit  against  the 
third  party,  then  the  testimony  of  the  officer  in  fault  may  be 
absolutely  essential,  or  at  least  very  desirable,  to  secure  the 
success  of  the  bank  ;  whereas  on  the  ground  that  he  is  a 
party  immediately  interested  in  the  result  of  the  litigation, 
he  must  in  all  probable  expectation  be  rejected  at  the  trial  as 
an  incompetent  witness,  unless  he  is  first  legally  and  fully 
released  from  his  liability  to  the  corporation.  In  this  di- 
lemma it  is  the  duty  of  the  directors  to  consult  solely  the 
comparative  ultimate  probability  of  securing  reimbursement 
to  the  bank  from  the  defendant  or  from  the  officer.  It  may 
be  that  the  amount  of  the  loss  is  greater  than  can  possibly  be 
recovered  from  the  officer  or  from  his  bondsmen,  while  the 
other  defendant  would  be  amply  able  to  pay  it.  It  may  be 
that  the  result  of  the  suit  is  doubtful ;  or  it  may  be  that  only 
a  successful  result  can  in  reason  be  anticipated.  Upon  the 
consideration  of  such  facts,  the  directors  must  conclude 
whether  or  not  worldly  wisdom  would  lead  them  to  release 
the  claim  of  the  bank  against  the  officer,  or  to  abandon  the 
notion  of  the  other  suit,  or  to  sacrifice  in  its  prosecution  the 
advantage  of  his  evidence.  If  they  choose  the  first  course, 
then  it  is  not  only  in  their  power,  but  it  becomes  their  duty, 
to  execute  to  him  a  full,  valid,  and  sufficient  release  from  his 
liability.  We  say  they  must  be  guided  solely  by  their  notion 
of  worldly  wisdom  in  the  case ;  unless  by  direct  sanction 
from  the  stockholders,  their  feeling  towards  the  officer,  and 
their  opinion  of  his  conduct  and  character,  cannot  be  allowed 
8  Frankfort  Bank  v.  Johnson,  24  Me.  490. 

247 


§  121  DIRECTORS. 

any  weight  whatsoever ;  and  this  equally  Avhether  this  feeling 
and  opinion  would  lead  them  to  punish  him  to  the  utmost 
extent  of  their  power,  or  to  pity  and  relieve  him.  The  ques- 
tion is  purely  of  dollars  and  cents,  not  of  moral  desert,  of 
vindictiveness,  or  of  commiseration.* 

§  120.  The  board  of  course  has  power  to  part  with  or 
to  pledge  the  property  of  the  bank  in  the  ordinary  and  due 
Pied-'e.  course  of  business,  and  for  proper  purposes.     So 

Assig-iimeiit,    j^  jj^^^  assijiui  or  transfer  anv  i)art  or  the   whole 

«S:c.  of  bank  s  j  o  ^     i 

property.  of  tlic  Corporate  assets,  of  whatever  description 
of  property  they  may  consist,  in  order  to  pay  corporate 
debts,  or  to  secure  creditors  having  preferred  claims.  Its 
rights  and  powers  in  this  respect  are  co-ordinate  with  the 
rights  and  powers  enjoyed  by  individuals  in  the  same  situ- 
ation. Whatever  a  merchant  or  a  mercantile  firm,  owing 
largely  or  more  than  they  can  pay,  could  legally  do  with  their 
property  to  pay  or  secure  their  creditors,  all  or  any  of  them, 
the  board  of  directors  can  legally  do  with  the  funds  of  the 
bank.^  This  is  the  rule  of  common  law.  Of  course  it  may 
be  modified  by  legislative  enactments  imposing  peculiar  duties 
or  restrictions  upon  institutions  seriously  indebted,  in  failing 
circumstances,  or  fully  insolvent. 

The  directors  of  an  insolvent  savings  bank  may  in  good 
faith  assign  the  assets  of  the  bank  for  the  benefit  of  creditors, 
without  first  obtaining  the  consent  of  the  stockholders.^ 

§  121.  Issue  of  Bank  Notes  or  Bills  a  Function  of  the  Direc- 
tors.—  If  the  bank  has  the  legal  authority  to  issue  its  bills  or 
notes  for  circulation  as  currency,  the  power  to  make  the  issue 
is  one  of  the  ordinary  and  inherent  functions  of  the  board, 
which  the  public  has  a  right  to  presume  is  vested  in,  and  will 
be  honestly  exercised  by,  the  directors.  The  bank  is  held  to 
warrant  their  fidelity.      If   the  issue  is  attended  with  any 

*  Lewis  V.  Eastern  Bank,  32  Me.  90. 

1  §  120.  Stevens  v.  Hill,  29  Me.  1:33;  Dana  v.  Bank  of  United  States, 
5  Watts  &  S.  223;  Sargent  v.  Webster,  13  Met.  (Mass.)  497;  Merrick  v. 
Bank  of  the  Metropolis,  8  Gill,  59;  Bank  Commissioners  v.  Bank  of 
Brest,  Harring.  Ch.  (Mich.)  106. 

2  Descornbes  v.  Wood,  91  Mo.  196  (1886). 

248 


REMOVAL   OP   OFFICERS.  §  123 

error,  ne.iilcct,  or  fraud,  the  resulting  loss  is  that  of  the  bank. 
For*  example,  if  there  be,  from  any  of  these  causes,  an  over- 
issue, the  bank  must  yet  redeem  all  the  notes  in  the  hands  of 
innocent  holders.^  The  transaction,  falling  within  the  ordi- 
nary scope  of  directorial  authority,  is  one  wherein  the  bank 
guarantees  both  the  integrity  and  the  accuracy  of  its  agents. 

§  122.  They  may  make  arrangements  with  other  banks  to 
collect  notes  and  dividends,  to  redeem  their  bills,  transfer 
stock,  or  for  any  other  business  usual  or  proper  for  one  bank 
to  transact  with  another.^ 

§  128.  Directors  may  for  Cause  discharge  any  Employee  at 
any  Time.^  —  Ihit  the  power  of  the  directors  over  the  president, 
at  least  under  our  present  National  Banking  Act,  is  greater. 
Him,  it  has  been  declared,  they  may  remove  absolutely  and 
at  any  time  by  their  own  sole  action.^  A  clause  in  the  articles 
of  association,  giving  them  this  power,  is  valid,  and  will  suffi- 
ciently authorize  them  to  exercise  it.  But  such  a  clause  is, 
in  fact,  surplusage,  for  the  act  of  Congress,  sect.  11,  itself 
directly  and  fully  bestows  the  power.  The  construction  of 
this  section,  as  referring  to  directors  and  not  to  stockholders, 
the  court  say,  is  quite  clear.  In  the  case  cited,  it  was  urged 
that  no  by-laws  had  ever  been  adopted  by  the  stockholders  or 
accepted  by  the  comptroller  of  the  currency ;  and  that,  until 
this  had  been  done,  the  directors  could  not  properly  perform 
the  act  of  removal.  The  objection,  however,  was  overruled. 
It  was  not  considered  at  all  necessary  that  by-laws  should 
have  been  adopted  before  a  president  could  be  chosen,  be 
removed,  and  a  successor  be  appointed.  The  by-laws,  in  fact, 
could  have  nothing  to  say  about  the  matter  at  all ;  save,  per- 
haps, that  they  might  be  permitted  to  prescribe  unessential 
formalities  to  accompany  its  exercise.  What  the  act  of 
Congress  explicitly  gives,  not  even  the  articles  of  association 
could  take  away  ;  much  less  could  the  by-laws  interfere  with 
it.      Their   formal   adoption,   even   their   existence,   are   not 

»  §  121.    McDoujrald  v.  Bellamy,  18  Ga.  411. 

1  §  122.    Bank  of  Kentucky  v.  Schuylkill  Bank,  1  Pars.  Sel.  Cas.  236. 
*  §  123.    Harrington  v.  First  National  Bank,  1  Thonip.  &  C.  3til. 

2  Taylor  v.  Hutton,  43  Barb.  195. 

249 


§  124  DIRECTORS. 

necessary  preliminaries  to  the  exercise  of  a  power  which 
springs  from  a  source  wholly  independent  of  them,  'and 
inlinitely  above  them  in  weight  and  authority. 

§  124.  Quorum.  —  A  majority  of  the  directors  make  a  quo- 
rum, and  a  maj(H-ity  of  a  quorum  may  act.^ 

Tlie  bank  is  bound  by  the  action  of  the  majority  of  the 
board,  taken  in  the  manner  usually  adopted  by  the  board,  no 
Majority  of  a  matter  how  informal  or  peculiar  that  manner  may 
quorum  at      ^        ^,^  exurcssiou  of  the  will  of  the  majority  is 

legal  meeting  '  .  „ 

rules.  what  the  law  looks  for  and  recognizes.^     it  seems, 

however,  that  it  is  indispensable  to  the  validity  of  any  action 
that  it  should  be  taken  "by  the  board ;  that  is,  that  it  should 
he  the  vote  of  a  majority  of  a  quoruin  at  a  regular  and  legal 
meeting  of  the  hoard.  Thus,  it  has  been  held  that  the  assent 
of  a  majority  of  the  directors,  expressed  by  them  individ- 
ually, and  not  at  a  regular  stated  meeting  of  the  board,  is 
not  sufficient  to  confer  upon  the  cashier  authority  to  do  any 
act  which  he  would  not  have  authority  to  do  unless  it  were 
conferred  upon  him  by  the  directors.^ 

"The  only  powers  conferred  by  statute  upon  the  direc- 
tors of  a  national  bank  are  vested  in  them  as  a  board,  and 
when  acting  as  a  unit,  and  therefore  the  assent  of  a  majority 
of  the  individual  members  of  the  board,  acting  separately 
and  singly,  is  not  the  assent  of  the  bank,  and  is  not  binding 
upon  it."  4 

It  appears  that,  when  a  quorum  of  the  directors  is  assem- 
bled at  a  legal  meeting,  the  action  of  those  present  will 
bind  the  bank,  even  though  the  remainder  of  the 
tify  mrarers  dircctors  havc  had  no  notification  of  the  meeting.^ 
of  a  meeting,  r^i^^^^gj^  ^^iQ  action  of  the  quorum  may  be  valid  as 
the  action  of  the  corporation  under  such  circumstances,  yet  it 
by  no  means  follows  that  the  members  may  not  themselves  be 

1  §  124.    Lockwood  v.  American  National  Bank,  9  R.  I.  308. 

2  Bank  of  IMiddlebury  v.  Rutland  &  Washington  R.  R.  Co.,  30  Vt.  159. 
8  Elliot  f.  Abbot,  12  N.  II.  519. 

4  National   Bank  v.  Drake,  35  Kans.  564;   Corbett  v.  Woodward,  5 
Saw.  403. 

5  Edgerly  '"•  Emerson,  3  Fost.  555. 

250 


RIGHTS   OF    DIRECTORS.  §  125 

in  fault  if  the  failure  to  notify  all  the  members  of  the  board 
was  not  absolutely  unavoidable.  It  is  the  duty  of  every 
director  to  be  present  at  every  meeting  of  the  board.  Clearly 
the  responsibility  which  rests  upon  him  as  a  part  of  the  gov- 
ernment of  the  corporation  gives  him  the  absolute  right 
to  demand  that  due  notice  be  given  him  of  all  meetings  of 
the  government  for  deliberation  or  action.  The  directors 
have  no  power  or  discretion,  directly  or  indirectly,  to  debar 
any  one  of  their  number  from  the  exercise  of  all  his  rights, 
a  fortiori  from  the  performance  of  all  his  duties.  Not  even 
the  conviction,  honestly  entertained  by  all  the  rest,  that  one 
of  the  members  is  secretly  hostile  to  the  real  in-  Rights  of  a 
terests  of  the  bank,  will  authorize  them  to  refuse  *^"'®*^'°'"- 
him  any  of  those  means  of  scrutinizing  its  affairs  which 
ordinarily  pertain  to  his  incumbency  in  office.  Even  the  for- 
mality of  a  by-law  is  impotent  to  deny  him  access  to  the  books 
and  accounts.  A  by-law  assuming  to  do  so  is  simply  invalid. 
The  effort  to  exclude  by  such  a  by-law  constitutes,  by  itself, 
sufficient  and  proper  ground  for  the  granting  a  writ  of  man- 
damus in  favor  of  the  excluded  official ;  and  the  writ  may  be 
directed  not  alone  to  the  other  directors,  but  also  to  any  sub- 
ordinate officer  who  has  assisted  in  the  attempt  to  prevent 
the  ousted  petitioner  from  exercising  any  of  his  legal  func- 
tions. The  supposed  hostility  on  the  part  of  the  petitioner 
towards  the  corporation,  even  if  it  should  be  proved,  would 
furnish  no  valid  cause  for  withholding  the  writ.^ 

§  125.  Duties  of  Directors.  —  They  must  carefully  obey  the 
law  under  which  the  bank  is  organized,  must  act  with  entire 
good  faith,  and,  like  all  other  agents,  they  contract  for  reason- 
able capacity,  skill,  and  care  in  the  discharge  of  their  duties. 
See  §  128. 

The  high  degree  of  confidence  and  responsibility  resting 
upon  directors  of  corporations  has  often  led  the  courts  to 
regard  them  as  trustees,  and  to  declare  the  relationship 
existing  between  them  and  the  stockholders  to  be  that  of 
trustees  and  cestuis  que  trustent,  respectively.  If  this  can  be 
asserted  Avith  regard  to  the  generality  of  corporations,  it  is 
6  People  V.  Throop,  12  Wend.  183. 

251 


§  125  DIRECTOns. 

peculiarly  and  exceptionally  true  with  regard  to  banking  cor- 
porations, in  whose  solvency  the  whole  neighboring  com- 
munity must  be  at  least  indirectly  interested.  A  bank  of 
issue  may  i)ropcrly  be  regarded  as  a  quasi  public  corpora- 
Trustees  for  tion.  The  directors  of  a  bank  are  not  trustees 
udri aifd'"'"  fo^'  the  stockholders  alone,  but  they  owe  an  even 
stockholders,  earlier  duty  to  the  depositors,  and,  if  the  bank  ex- 
ercises the  privilege  of  circulation,  still  a  prior  duty  to  the 
public  at  large.  The  law  is,  as  it  ought  to  be,  very  jealous 
in  exacting  the  strict  and  thorough  performance  of  these 
duties,  and  it  is  in  the  scrutiny  of  possible  breaches  of  them 
that  the  rigid  rules  which  govern  trustees  have  been  applied. 
It  is  not  enough  to  exculpate  a  director,  that  no  actual  dis- 
honesty can  be  shown,  that  he  cannot  be  positively  proved  to 
have  been  influenced  by  interested  motives.  Like  a  trustee, 
he  is  absolutely  prohibited  from  the  performance  of  those 
questionable  acts  wherein  his  conduct  may  be  wholly  free 
from  blame,  but  where  the  bias  of  self-interest  is  strong,  and 
may  influence  him  even  without  his  own  recognition  of  the 
fact.  A  director,  who  wishes  to  keep  completely  within  the 
protection  of  the  law,  must  look  to  something  more  than  the 
mere  integrity  of  his  own  mtentions. 

(a)    The  law  is  obliged  to  forbid  a  certain  general  class  of 

actions  in  which  the  temptation  is  so  great  that  it  is  wisely 

regarded  as  better  wholly  to  remove  human  frailty 

Directors  o  ./  j 

must  not  be    from  tlic  possibility  of  yielding  than  to  be  con- 
interested  ad-     .         Ill         .         •  111-         •         •• 
verseiy  to       tmually  pluugmg  into  darklmg  mquiries  as  to  the 

probable  purity  and  uprightness  of  sundry  isolated 
transactions.  It  is  possible  that  any  person,  being  a  director, 
might,  at  a  meeting  of  the  board,  vote  honestly  and  with  a 
single  eye  to  the  bank's  welfare,  upon  a  question  in  which  he 
had  an  individual  interest  opposed  to  that  of  the  corporation. 
It  is  also  possible  that  he  might  intend  so  to  vote,  and  yet  not 
succeed  in  doing  so,  by  reason  of  the  unconscious  obli(piity 
of  mental  vision  which  such  circumstances  may  often  produce. 
But  a  sound  precaution  prefers  to  exchange  these  possibili- 
ties for  a  certainty.  The  law  therefore  has,  with  wholesome 
care,  declared  that  it  is  a  duty  of  a  director,  resulting  from 
252 


ADVERSE   INTEREST.  §  12o 

the  employment  itself,  not  to  acquire  any  interest  in  any 
matter  adverse  to  that  of  the  bank  so  long  as  he  remains  in 
of!ice.     See  §  127  d. 

"  A  trustee  may  not,  as  such,  purchase  property  in  which 
he  has  an  individual  interest.  The  law,  in  such  case,  does 
not  stop  to  inquire  whether  the  transaction  was  fair  or  unfair, 
but,  when  the  relation  is  disclosed,  sets  aside  the  transaction, 
or  refuses  to  enforce  it  at  the  instance  of  ceatid  que  trust.'"  ^ 

"  A  corporation  in  order  to  defeat  a  contract  entered  into 
by  its  directors  on  its  behalf,  in  tvhich  one  or  more  of  them 
had  a  private  interest,  is  not  hound  to  show  that  the  influence 
of  the  director  or  directors  having  the  private  interest  deter- 
mined the  action  of  the  board." 

"  The  plaintiffs,  therefore,  are  compelled  to  meet  the  ques- 
tion, whether,  upon  principles  of  equity,  they  are  entitled  to 
the  aid  of  the  court  to  enforce  an  executory  contract  between 
themselves  on  one  side,  and  the  defendant  corporation  on  the 
other,  for  the  sale  of  the  property  of  the  former,  and  in  a  case 
where  one  of  the  plaintiffs  at  the  time  the  contract  was  made, 
was  a  director  of  the  purchasing  corporation,  and  took  part 
in  making  the  contract  upon  which  the  action  is  brought." 

"  We  are  of  opinion  tiiat  the  contract  of  September  14, 
1875,  is  repugnant  to  the  great  rule  of  law  which  invalidates 
all  contracts  made  by  a  trustee  or  fiduciary,  in  which  he 
is  personally  interested,  at  the  election  of  the  party  he  rep- 
resents." 

"  The  law  stops  the  inquiry  when  the  relation  is  disclosed, 
and  sets  aside  the  transaction,  or  refuses  to  enforce  it  at  the 
instance  of  the  party  whom  the  fiduciary  undertook  to  repre- 
sent, without  undertaking  to  deal  with  the  question  of  abstract 
justice  in  the  particular  case.  It  prevents  frauds  by  making 
them,  as  far  as  may  be,  impossible,  knowing  that  real  motives 
often  elude  the  most  searching  inquiry,  and  it  leaves  neither 
to  judge  nor  jury  the  right  to  determine,  upon  a  consideration 
of  its  advantages  or  disadvantages,  whether  a  contract  made 
under  such  circumstancos  shall  stand  or  fall.  It  will  make 
no  difference  in  the  apjilication  of  the  rule  in  this  case,  that 

1  §  125.   Munson  et  al.  i>.  Syracuse,  &c.  R.  R.  Co.,  103  N.  Y.  58,  71-74. 

253 


§  125  DIRECTORS. 

M.'s  associates  were  not  themselves  disabled  from  contracting 
with  tlie  corporation,  or  that  M.  was  only  one  of  ten  directors." 

(i)  It  is  fraud  for  directors  to  secure  by  means  of  their 
trust,  any  advantage  not  common  to  the  other  stockholders. 
The  law  will  not  allow  private  profit  from  a  trust, 
;i  proiit  tin, 11  and  Will  not  listen  to  any  jtrooi  of  honest  intent. 
'"*'""'■  It  is  useless  for  a  trustee  to  exert  his  wits  to 
contrive  evasions  of  this  prohibition.-  Not  only  must  he 
refrain  from  voting  on  questions  in  which  he  is  directly 
interested,  but  he  must  not  use  his  influence,  resulting  from 
his  official  position,  to  secure  his  own  ends  or  his  private 
advantage.  Neither,  of  course,  can  he  directly  or  indirectly 
barter  this  influence  to  any  outside  person  upon  any  species 
of  consideration  moving  from  that  person  to  himself.  It  is 
not  enough  in  the  eye  of  the  law  to  protect  him,  that  he  did 
not  mean  to  prejudice  the  bank.  If  his  act  is  open  to  sus- 
picion, he  will,  like  a  trustee,  be  held  to  have  violated  his 
duty,  which  is,  not  to  strive  to  do  (|uestionable  things  con- 
scientiously, but  Avholly  to  refrain  from  all  action  or  inter- 
meddling in  them  of  what  nature  soever.'"^ 

Attempts  have  often  been  made  to  prevent,  by  statutory 
enactment,  or  by  provisions  in  charters,  some  of  the  more 
definite  and  openly  dangerous  acts  which  directors  may  some- 
times be  tempted  to  do  for  their  own  use  and  advantage. 
But  this  method  is  necessarily  insufficient.  The  language,  if 
specific,  will  cover  too  little  ;  if  general,  will  cover  too  much  ; 
and  so  in  either  case  the  phraseology  will  be  easily  perverted, 
and  the  intent  evaded,  on  the  plea  of  reasonable  construction 
or  necessity.  The  National  Banking  Act  wisely  refrains  from 
any  enactment  on  the  subject  of  loans  or  discounts  made  to 
directors.     It  leaves  their  conduct  in  all  particulars  to  the 

2  Farmers  &  Merchants'  Bank  v.  Downy,  53  Cal.  466;  Koehler  v.  Black 
River  Falls  Iron  Co.,  2  Black,  721 ;  Bain  v.  Brown,  50  N.  Y.  285. 

8  Butts  V.  Wood,  38  Barb.  181;  Ex  parte  Bennett,  18  Beav.  339;  Ben- 
son  V.  Heathorn,  1  You.  &  C.  Ch.  326;  York  Railway  Co.  v.  Hudson, 
19  Eng.  L.  &  Eq.  361;  16  Beav.  485;  Richards  v.  New  Hampshire  Ins. 
Co.,  43  N.  H.  263;  Baird  v.  Bank  of  Washington,  11  Serg.  &  R.  411; 
In  re  Grant,  7  Moore,  P.  C.  141;  Ex  parte  Robinson,  2  De  G.  M.  & 
G.  517. 

254 


LOANS   TO    A    DIRECTOR.  §  125 

supervision  of  the  common  law,  which,  as  it  has  hccn  above 
laid  down,  must  be  regarded  as  requiring  only  proper  and 
efficient  enforcement  to  render  it  fully  equal  to  the  task  thus 
imposed  uj)on  it,  of  securing  perfect  purity  in  the  adminis- 
tration of  the  bank's  affairs. 

(f)  In  the  absence  of  legislative  prohibition,  there  is  no 
rule  of  the  commpn  law  which  prevents  the  making  a  loan  or 
discount  to  a  director  any  more  than  to  any  other   „ 

•'  •'  Mav  take  a 

person.  Only,  a  director  applying  for  such  a  loan  loan  from 
must  not  vote  or  officially  aid  in  the  discussion  con- 
cerning its  allowance.  The  same  princi[)les  of  law  will  be 
applied  to  tliis  as  to  other  loans ;  but  tliey  will  be  rigidly  en- 
forced, and  the  proceedings  will  be  severely  scrutinized.*  He 
must  behave  himself  strictly  like  any  other  outside  customer 
of  the  cor[)oration.  He  must  cause  his  request  to  be  acted 
upon  by  the  majority  of  his  co-directors,  strictly  exclusive  of 
himself.  It  is  probable  that  any  circumstances  of  impropriety 
or  suspicion  attendant  upon  the  fact  of  his  making  the  appli- 
cation at  all,  or  upon  the  manner  of  making  it  or  procuring  its 
acceptance,  would  be  construed  with  a  degree  of  stringency, 
as  against  him,  greater  than  would  be  exercised  towards  an 
ordinary  outside  borrower.  Under  any  circumstances,  favorit- 
ism and  fear  of  offending  are  too  likely  to  have  some  influence 
in  such  a  transaction,  and  even  the  suspicion  of  them  cannot 
be  too  carefully  guarded  against.  Prudence  no  less  than  right 
feeling  should  prevent  the  applicant  from  even  being  present 
at  the  discussion  and  vote. 

{d)  If  a  statute  prohibits  loans  to  directors,  a  loan  to  a 
firm  in  which  a  director  is  one  of  the  copartners  is  illegal.^ 
But  the  mere  fact  that  the  director  is  to  be  ulti-   When  loan 
mately  benefited  by  a  loan  is  not  per  se  enough   prohibited, 
to  make  the  loan  improper  or  invalid,  even  when   o*thc/f()r"use 
loans  to  directors  are  prohibited  by  law.      If  the   "^  *  <^ircctor 

•  r  J  IS  not  iin- 

board  is  satisfied  with  the  credit  or  securities  of-   lawful, 
fered  by  A.,  they  may  discount  his  note,  although  the  amount 
received  by  him  is  to  go  to  the  use  and  into  the  posses- 

*  See  Conyngham's  Appeal,  57  Penn.  St.  474. 

*  Bank  Commissioners  v.  Bank  of  Buffalo,  6  Paige,  497. 

255 


§  126  DIRECTORS. 

sion  of  one  of  themselves.  The  question  is,  Who  is  tlie  real 
debtor  to  the  bank  ?  not,  Wliat  use  will  the  debtor  make  of 
the  borrowed  funds?  Accurdini^ly,  where  a  statute  forbade 
any  director  to  "  become  indebted  or  liable  "  to  the  bank  for 
a  sum  exceeding  fifty  per  cent  of  the  amount  of  the  capital 
stock  of  the  bank  owned  by  him,  and  a  note  was  given  to  the 
bank  by  other  parties,  though  in  fact  the  debt  was  for  the 
benefit  of  a  director,  it  was  held  that  this  was  not  an  illegal 
evasion  of  the  statute,  inasmuch  as  the  note  and  the  claim 
thereon  of  the  bank  were  good  against  the  signers.  The  case 
is  very  poorly  reported,  but  this  point  seems  to  be  deducible 
from  it.^ 

(^e)  A  proliibition  in  a  bank  cliarter  forbidding  a  loan  to 
be  made  to  an  officer  of  the  bank  does  not  render  the  con- 
.„     , ,         tract  whereby  such  loan  is  made  null   and  void. 

Illegal  loan  •' 

not  necessa-    The  charter  of  a  bank  in  Maryland  contained  such 

rily  void.  ,...  t    r        ^  -ii 

See  Ultra  a  prohibition,  and  iurther  provided  a  penalty,  as  tor 
tirts,^,.-.  ^  crime,  to  be  inflicted  on  any  officer  who  should 
be  convicted  of  breaking  tliis  law.  A  loan  was  made  to  a 
director,  and  he  sought  to  defend  in  a  suit  brought  to  recover 
the  amount,  on  the  ground  that  the  whole  transaction,  being 
illegal,  was  null  and  void,  and  that  he  could  not  be  holden. 
But  the  court  ruled  tliis  defence  to  be  absurd  and  inadmis- 
sible." Yet  it  seems  that,  if  by  reason  of  tliis  illegal  act  an 
innocent  third  party  be  prejudiced,  such  third  party  may  be 
recouped  at  the  cost  of  the  bank.^  If  the  amount  of  the  loan, 
or  any  part  of  it,  be  lost  to  the  bank,  it  is  obvious  that  the  loss 
falls  on  the  shareholders,  who  should  be  permitted  to  have 
their  remedy  in  some  practicable  shape. 

§  llib.  Duty  of  Directors  concerning  unauthorized  illegal  Acts 
of  Officers.  —  It  will  often  happen  that  a  subordinate  officer 
will  do  an  act  either  illegal  or  fraudulent,  which  is  of  such  a 
nature,  or  done  in  such  a  manner,  that  it  does  not  necessarily 
bind  or  affect  the  bank.  Thus  the  conduct  of  a  single  officer 
may  be  such  that,  if  it  could  be  construed  as  the  action  of  the 

*  Pemigewassett  Bank  v.  Rogers,  18  N.  H.  255. 
'  Lester  v.  Howard  Bank,  33  Md.  558. 
8  Albert  c.  Savings  Bank,  2  Md.  160. 

256 


DUTY   IN   CASE   OF   DEFAULTING    OFFICER.  §  12G 

corporation,  it  would  cause  a  forfeiture  of  the  charter;  but  if 
it  be  without  the  direction  or  privity,  a  fortiori  if  it  be  con- 
trary to  the  actual  orders,  of  the  board  of  directors,  the  pun- 
ishment will  be  meted  solely  to  the  wrongdoer,  and  it  will  be 
considered  that  the  nature  of  the  case  furnishes  no  ground  for 
a  proceeding  for  forfeiture  or  penalty  against  the  bank  itself. 
But  whenever  knowledge  of  the  commission  of  an  act  of  this 
description,  any  or  all  the  possible  results  of  which  might  be 
averted  from  the  bank,  is  brought  home  to  the  directors,  it  is 
incumbent  upon  them  at  once  to  disavow  the  doings  of  their 
officer  on  behalf  of  the  body  corporate,  to  decline  to  allow  the 
corporation  to  receive  any  benefit  from  them,  and,  so  far  as 
can  be  done  reasonably  and  without  injury,  to  seek  to  undo 
the  transaction  if  it  be  still  inchoate  or  imperfect. 

(a)  If  the  whole  affair  is  completed,  and  can  no  longer  be 
repudiated  or  undone,  or  if  no  good  or  just  end  could  be  at- 
tained by  the  repudiating  or  undoing  when  knowledge  of  it  first 
reaches  the  board,  still  it  is  their  duty  promptly  to  remove  the 
official  who  was  guilty  of  the  misdemeanor.  If  ^justn^j 
thev  neglect  these  steps,  if  they  knowingly  suffer   fytain  the 

'^  ^     '  ■^  ^  ''  benefit  or 

the  bank  to  reap  advantage  from  the  wrongful  con-  tiie  wrong- 
duct,  or  if  they  continue  to  retain  the  wrong-doer  in 
service  of  the  bank,  they  will  be  regarded  as  sanctioning  and 
adopting  his  acts  on  behalf  of  the  bank,  and  it  will  be  affected 
by  these  precisely  as  if  they  had  been  originally  done  under 
direction,  or  with  the  cognizance,  approval,  or  collusion  of  the 
corporate  government.^ 

(6)  The  cited  cases  also  perhaps  suffice  to  sustain  a  doc- 
trine similar  to  that  which  we  laid  down  in  discussing  the 
possible  allegation  of  directors  that  they  were  ignorant  of  the 
existence  of  a  custom  and  usage  prevalent  in  their  bank. 
Such  an  excuse,  it  is  intimated,  would  be  utterly  insufficient 
to  shield  the  bank  from  the  natural  consequences  of  its  offi- 
cer's wrongful  act.  If  the  ignorance  of  the  directors  that  a 
breach  of  law  or  of  the  charter  has  been  committed  ronstmctive 
is  due  only  to  their  own  neglect  of  their  obvious  duty   •^^"owiedge. 

*  §  126.  Rank  Commissioners  v.  Bank  of  Buffalo,  6  PaiE^o.  407;  Rob- 
inson I'.  Bealle,  20  Ga.  275. 

VOL.  I.  17  257 


§  127  DIRECTORS. 

in  the  premises,  they,  i.  e.  the  bank,  will  not  be  permitted 
to  benefit  by  their  own  laches.  If  they  ought  to  have  known, 
and  have  no  sunicient  excuse  for  not  knowing,  the  law  will 
deal  with  the  corporation  precisely  as  if  they  had  actually 
known.  Thus  if  it  be  illegal  for  a  loan  or  discount  to  be 
made  to  a  director  beyond  a  certain  amount,  and  such  a  loan 
or  discount  is  actually  made,  the  fact  that  the  board  had 
neglected  to  examine  the  books,  and  so  did  not  know  that  the 
accounts  of  the  bank  with  this  director  showed  so  large  a  loan 
already  outstanding  to  him,  is  no  defence  whatsoever  in  a 
proceeding  by  the  bank  commissioners  for  the  dissolution  of 
the  corporation.^ 

§  127.  "What  the  Board  cannot  do.  —  The  board  of  directors 
is  limited  in  its  authority  to  the  management  and  transaction 
Cann  in-  ^^  ^^^^  Ordinary  business  for  Avhicli  the  company 
crease  capital  \vas  Created,  and  which  it  is  wont  to  transact ;  in- 

or  make  other 

radical  cludiug,  of  coursc,  sucli  matters  as  may  be  neces- 

"  '  sarily    incidental   thereto.      It  cannot  effect  great 

or  radical  changes  in  the  organization  of  the  company,  al- 
though such  changes  are  lawful  under  the  charter  or  organic 
law,  unless  the  same  be  consented  to  by  the  shareholders. 
For  example,  where  a  bank  is  chartered  with  a  certain  capital, 
but  with  power  to  increase  this  capital,  and  nothing  is  said  as 
to  the  manner  in  which  this  power  may  be  exercised,  the  di- 
rectors have  not  authority  to  determine  upon  and  make  such 
increase  ;  it  must  be  done  by  action  of  the  shareholders.^ 

(a)  Directors  can  use  the  funds  and  property  of  the  bank 
only  for  proper  banking  purposes,  and  for  the  strict  further- 
Cannotgive  aiicc  of  the  busincss  objects  and  financial  prosper- 
banfe's'prop-  '^^Y  of  the  Corporation.  Their  discretion  and  power 
^^'''  to  manage  its  affairs  extend  only  to  the  conducting 

those  affairs  in  the  best  manner  that  their  knowledge,  fore- 
sight, and  observation  can  suggest,  to  the  end  of  increasing 
the  profits  and  enhancing  the  value  of  the  investments  which 
have  been  intrusted  to  their  charge  by  others.     They  cannot 

2  Ibid. 

^  §  127.   Eidman  v.  Bowman,  58  111.  444;  and  see  Gray  v.  Portland 
Bank,  3  Mass.  364. 
258 


WHAT   DIRECTORS   MAY   NOT   DO.  §  127 

use  any  portion  of  the  money  for  such  objects  of  usefulness  or 
chanty,  or  the  like,  as  they  may  consider  worthy  of  encour- 
agement and  aid.  All  their  transactions  must  be  strict  mat- 
ters of  business.  They  cannot  make  gifts  from  the  corporate 
property.  They  cannot,  without  authority  from  the  stock- 
holders, subscribe  money  to  any  objects,  however  meritorious, 
unless  with  the  immediate  view  and  expectation  of  thereby 
furthering  the  actual  worldly  and  material  well-being  of  the 
bank.  They  arc  trustees  of  the  property  of  others  for  this 
sole  and  only  purpose,  and  if  they  appropriate  any  portion  of 
the  property  for  any  other  purpose  whatsoever,  however  in- 
trinsically deserving,  it  is  yet  a  deviation  from  their  obvious 
duty,  both  legal  and  moral,  for  it  is  nothing  else  than  a  clear 
breach  of  a  plain  and  simple  trust.^ 

Also  a  case  of  misappropriation  of  the  funds  of  the  corpora- 
tion has  been  held  to  be  where  the  directors,  apprehensive 
that  a  suit  was  to  be  instituted  against  them  by  the  stock- 
holders, used  corporate  funds  to  retain  counsel  for  their  own 
defence.^  A  clearer  case  of  a  wrongful  misapplication  and 
deflection  of  trust  money  from  the  purposes  of  the  trust  is  not 
likely  to  occur. 

(5)  A  cognate  rule  forbids  the  directors  needlessly  or  gra- 
tuitously to  assume  either  actual  or  contingent  liabilities  on 
behalf  of  others.  If  they  could  ever  have  the  right  cannot 
to  do  so,  it  could  be  only  under  circumstances  of  a^gratuftous 
urgent  necessity,  and  where  interests  of  the  bank  surety. 
seemed  to  be  in  some  degree  involved,  so  that  a  jury  would  be 
willing  to  regard  the  exceptional  excuse  as  sufficient.* 

(c)  If  a  director  or  the  board  act  beyond  tlieir  power  or 
contrary  to  their  duty,  third  parties  may  still  hold   pfl-e(.tof 
the  bank  on  the  transaction,  if  on  the  facts  as  ac-  wrongful  act 

_  .  as  between 

tually  or  constructively  known  to  such  third  parties   bank  and 
there  was  nothing  to  notify  them  of  the  wrongful- 
ness of  the  transaction. 

2  Frankfort  Bank  v.  Johnson,  2i  Me.  490;  Bedford  R.  R.  Co.  v.  Bow- 
ser, 48  Penn.  St.  29. 

8  Tercy  v.  ISIillaudon,  3  La.  568. 

*  Stark  Bank  v.  U.  S.  Pottery  Co.,  34  Vt.  144. 

259 


§  127  DIRECTORS. 

((?)  If  a  director  commits  a  bi'cach  of  duty  in  advocating, 
or  voting  upon,  a  measure  in  wliicli  he  is  so  interested  that  he 
ought  to  have  regarded  liimself  as  wholly  excluded  from  the 
deliberation  and  decision  upon  it,  yet  the  action  of  the  board 
thereon  will  be  valid  and  binding  upon  the  corporation  in  favor 
of  any  innocent  third  person,  not  cognizant  of  or  a  party  to  the 
wrongfulness  of  the  proceeding.  Thus,  in  a  case  where  a  direc- 
tor was  jointly  responsible  with  a  debtor  upon  a  debt  owing  to 
the  bank,  he  was  present  and  voted  at  the  meeting  when  the 
board  settled  the  debt  by  taking  a  conveyance  of  the  debtor's 
real  estate.  It  was  held  that  the  fact  of  his  voting,  however 
wrongful  in  him,  nevertheless  did  not  avoid  the  contract 
as  towards  the  debtor,  unless  fraudulent  collusion  on  the 
part  of  the  debtor  should  be  shown.  Tiie  debtor  had  noth- 
ing to  do  with  the  correctness  of  the  dealings  taking  place 
between  the  bank  and  its  own  agents  and  officers.  He  had 
only  to  satisfy  himself  that  the  board  was  acting  within  its 
powers.^ 

(e)  If  the  directors  give  away  the  bank's  property,  or  make 
the  bank  an  accommodation  indorser,  or  make  an  illegal  loan 
Ultra  vires  o^"  purchasc,  or  otlicrwisc  exceed  their  authority  in 
8tances"un-  ^^^^^^  ^  '^^'^7  ^^^^*  ^^^^  transaction  is  on  its  face  regu- 
kuown.  \q^^  and  apparently  within  the  scope  of  the  directo- 

rial authority,  and  no  circumstances  affect  third  parties  with 
notice  of  its  wrongfulness,  the  transaction  as  to  such  parties 
would  bind  the  bank. 

(/)  But  if  the  real  nature  of  the  act  were  known  to  the 
outsider,  he  would  be  held  to  a  knowledge  of  its  illegality  aris- 
uitra  vires  i^g  f rom  its  not  being  within  the  ordinary  agency 
stances""'"  Conferred  by  the  corporate  ])rincipal  upon  its  offi- 
known.  q\q\  agcuts.     For  directors,  though  they  are  the 

government  of  the  corporation,  are  yet,  no  less  than  any  subor- 
dinate officers,  its  agents,  with  a  definite  scope  to  their  agency, 
and  can  only  act  legally  within  this  scope.^     If  their  act  is 

^  Bainl  v.  Bank  of  Washington,  11  Serg.  &  R.  411. 

^  Salem  Bank  v.  (Uoucestor  Bank,  17  IMass.  1;  Bank  of  Kentucky  r. 
Schuylkill  Bank,  1  Pars.  Sel.  Cas.  180 ;  Ridley  v.  Plymouth  Grinding  & 
Baking  Co.,  2  Exch.  711. 
260 


DIEECTORS'    DEFAULT. — EFFECT  ON   THIRD    PARTIES.      §128 

sucli  that  it  is  the  duty  of  the  party  dealing  with  them  to 
know  that  it  falls  without  the  ordinary  limits  of  directorial 
power,  he  will  be  affected  by  its  invalidity.  If  the  facts  are 
known  to  him  which  show  that  as  matter  of  law  the  directors 
are  undertaking  an  act  of  this  description,  he  deals  with  them 
at  his  own  peril  if  he  neglects  to  satisfy  himself  that  they 
liavc  received  a  special  and  extraordinary  authority  in  the 
particular  case.  If  they  have  not,  any  loss  he  may  incur  is 
only  the  natural  result  of  his  own  laches.  Thus  it  is  a  prin- 
ciple of  law  that  the  directors  can  only  use  funds  of  the  bank 
for  legitimate  banking  purposes.  If  they  borrow  money  in- 
tending to  use  it  for  other  purposes,  and  the  lender  is  aware 
of  this  intent,  then  their  use  of  it  accordingly  will  relieve  the 
bank  from  indebtedness  upon  the  loan.^  See  on  this  topic. 
Ultra  vires,  §  722. 

§  128.  Liability  of  Directors.  —  If  bank  directors  do  not 
manage  the  affairs  and  business  of  the  bank  according  to  the 
directions  of  the  charter  and  in  good  faith,  they  will  be  liable 
to  make  good  all  losses  which  their  misconduct  may  inflict 
upon  either  stockholders  or  creditors,  or  both.i 

If  the  directors  do  not  use  ordinary  diligence  to  know  the 
conduct  of  officers  and  what  the  bank  books  show.  For  careless 
and  to  control  their  subordinates,  and  loss  results,  supervision, 
they  are  liable.- 

They  may  be  held  to  account  to  an  injured  party  in  a 
court  of  chancery,^  or  they,  or  any  one  of  their  number  who 
shared  in  the  wrongdoing,  may  be  sued  at  law  for  damages.* 
But  for  excusable  mistakes  concerning  the  law,  and  for  many 
errors  strictly  of  discretion,  they  are  not  liable.  Though  in 
cases  in  which  their  action  has  been  so  grossly  ill  advised  as 
to  warrant  the  imputation  of  fraud,  or  to  show  a  want  of  the 

'  Bank  of  Australasia  v.  Breillat,  6  Moore,  P.  C.  197. 

1  §  128.  Hodges  V.  New  England  Screw  Co.,  1  R.  I.  312;  3  id.  9; 
Bank  of  St.  Mary's  v.  St.  John,  25  Ala.  N.  s.  566  ;  Attorney-General  v. 
Wilson,  1  Craig  &  Ph.  1;  10  L.  J.  n.  s.  53;  4  Jur.  1174. 

2  United  Society  r.  Underwood,  9  Bush,  (Ky.)  G09. 

8  Hodges  V.  New  England  Screw  Co.,  supra;  Bank  of  St.  Mary's  v. 
St.  John,  supra. 

*  Conant  v.  Seneca  County  Bank,  1  Ohio  St.  298. 

261 


§  128  DIRECTORS. 

knowledge  absolutely  necessary  for  the  performance  of  their 
duties,  so  great  that  they  were  not  justihed  in  assuming  the 
office,  they  may  be  held  responsible.^  They  are  required  sim- 
ply to  show  a  reasonable  capacity  for  the  i)Osition  they  accept ; 
to  use  in  it  their  best  discretion  and  industry  ;  to  show  the 
scrupulous  bona  fides  and  concientiousness  in  every  matter, 
however  minute,  which  is  exacted  rigorously  from  all  trustees 
of  the  property  of  others ;  and  to  obey  accurately  the  requisi- 
tions of  the  charter,  or  of  the  general  law  under  which  they 
are  organized. 

(a)  For  example,  if  directors  declare  a  dividend  at  a  time 
when  the  bank  is  so  far  embarrassed  that  such  a  needless 
Wrongful  disbursement  of  money  must  be  regarded  as  an  act 
dividend.  Qf  either  fraud  or  folly,  and  which  could  have  been 
advocated  by  no  man  who  was  not  either  dishonest  or  grossly 
incapable,  they  may  be  held  liable  for  the  consequent  loss  to 
the  corporation.^  The  act  is  not  to  be  excused,  for  it  must 
be  either  fraudulent  or  the  result  of  such  excessive  unfitness 
as  to  become  the  legal  equivalent  of  fraud. 

(J)  Collateral  to  this  right  of  action  for  the  improper  dec- 
laration of  a  dividend,  is  the  right  of  the  shareholder  to  pro- 
tection for  the  future  in  a  court  of  equity.  It  is  one  of  the 
very  few  cases  in  which  he  can  interfere  to  control  the  judg- 
ment of  the  board.  If  he  makes  out  a  proper  case,  he  may 
have  an  injunction  against  the  directors,  prohibiting  the  de- 
claring of  other  dividends  thereafter.  The  proceeding  for 
this  purpose  is  an  independent  one,  and  does  not  operate  as 
a  waiver  of  his  right  of  action  at  law  to  recover  damages  for 
the  injury  sustained  from  the  payment  of  the  dividend  already 
declared.  For  apparently  this  act,  however  wrongful,  cannot 
be  undone  after  the  measure  has  passed  the  corporate  govern- 
ment. The  right  of  each  shareholder  to  receive  his  dividend 
is  perfect  so  soon  as  there  has  been  a  formal  vote  to  pay  it. 
It  is  rendered  a  debt  owing  from  the  bank  to  him.  After  this 
stage  it  is  too  late  for  a  court  of  equity  to  enjoin  the  disburse- 

6  Godbold  ».  Branch  Bank,  11  Ala.  191;  Smith  v.  Prattville  Manufac- 
turing Co.,  29  id.  N.s.  503. 

6  Gunkle's  Appeal,  48  Pa.  St.  13. 
262 


LIABILITY    OF   DIRECTORS.  —  OVER-ISSUE.  §  128 

mcnt  of  the  dividend,  certainly  where  only  one  shareholder  is 
before  the  court.' 

(c)  So  ai!;ain  if  the  charter  forbids  the  issue  of  bills  for  cir- 
culation before  a  certain  portion  of  the  capital  stock  has  been 
subscribed  and  paid  in,  in  specie,  an  issue  before  that  Wrongful 
time  will  make  the  directors  [lersonally  lial)le  to  re-  'ss"e  of  bills. 
deem  any  of  the  bills  which  the  bank  is  unable  to  pay  in  the 
due  and  ordinary  course  of  its  business.  A  statutory  requisi- 
tion of  a  nature  so  plain  and  simple  as  this  cannot  be  excusa- 
bly broken.  If  broken,  the  breach  cannot  be  regarded  as  a 
mistake  of  law.® 

It  has  been  declared  in  a  Georgia  case,  that  with  the  expi- 
ration of  the  charter  of  the  bank  the  liability  of  the  directors 
for  over-issues  ceases  also.^  One  judge  dissented  from  this 
opinion,  and  it  must  be  confessed  that  it  is  difhcult  to  believe 
that  it  is  sound  law.  An  over-issue  of  circulating  bills  is  a 
very  grave  offence.  It  can  hardly  be  made  honestly,  and  even 
if  it  is,  the  gross  neglect  of  duty,  which  must  open  the  door 
to  it,  deserves  a  scarcely  lighter  responsibility  than  actual 
fraud.  But  if  there  is  to  be  any  limitation  to  a  liability  thus 
created,  surely  it  cannot  accrue  until  such  time  as  no  person 
on  behalf  of  the  institution  has  the  duty  of  redeeming  its 
notes,  so  that  those  still  remaining  out  may  properly  be  sup- 
posed by  the  community  to  be  utterly  worthless.  Statutory 
or  charter  provisions,  or  judicial  decrees,  often  place  this  time 
at  a  date  much  later  than  that  of  the  expiration  of  the  charter. 
So  long  as  the  community  have  a  right  to  look  to  any  one  to 
redeem  the  bills  of  the  bank,  surely  they  should  have  the  right 
to  look  to  a  director  who  has  taken  part  in  an  over-issue. 

(cZ)  Mistakes  as  to  what  is  the  law  serve  to  excuse  in  cases 
where  correct  knowledge  could  be  reasonably  expected  only 
from  a  professional  man,  and  even  in  such  cases,  if   Mistakes  of 
the  directors  feel  any  doubts,  they  may  be  guilty  of   ^*^" 
neglect  if  they  fail  to  seek  and  be  guided  by  competent  legal 
advice.     Thus  the  board  of  a  bank  voted  to  pay  a  director  for 

T  Fawcett  v.  Laurie,  1  Drew.  &  S.  192. 
8  Schley  v.  Dixon,  24  Ga.  273. 
«  Moultin  V.  Hoge,  21  Ga.  513. 

263 


§  128  DIRECTORS. 

services  ;  the  court  held  that  he  could  not  be  legally  paid.  But 
the  point  was  purely  legal ;  the  directors  had  acted  honestly  and 
without  negligence  in  the  matter,  and  they  were  accordingly 
exculpated  from  blame  or  responsibility. ^^^  But  ignorance  of 
any  fact  in  the  bank's  affairs  which  it  is  their  duty  to  know, 
can  never  be  set  up  by  them  in  defence  or  exculpation  for  any 
act  which  the  existence  of  that  fact  should  have  prohibited.^^ 

(e)  If  the  cashier  is  properly  selected,  there  is  no  ncgli- 
Not  negii-  gcncc  in  letting  him  select,  and  hire,  and  pay  from 
gence.  j^jg  salary,  the  clerks  and  servants  of  the  bank.^^ 

(/)  A  director  cannot  escape  liability  for  the  results  of  his 
111  health  not  iguorancc  of  the  affairs  of  the  bank,  on  the  ground 
an  excuse.      ^j^g^^  j^^  ^as  bccn  in  ill  hcalth.13 

(f/)  A  very  common  provision  in  banking  acts  and  bank 
charters  names  a  certain  sum  or  ratio  which  the  indebtedness 
Going  beyond  0^  the  bank  shall  never  be  allowed  to  exceed,  and 
bank's* indebt- ^°^'  any  cxcess  makcs  the  directors  under  whose 
edness.  administration  it  was  allowed  liable.     Apparently 

directors  have  a  salutary  fear  of  exposing  themselves  to  the 
risks  of  this  enactment,  for  few  suits  are  reported  in  the 
books.  Neither  are  those  few  which  are  found  very  valuable 
authorities.  The  chief  lesson  that  they  teach  is  the  necessity 
of  a  minute  accuracy  of  detail  in  any  legislation  which  may  be 
undertaken  for  the  accomplishment  of  an  end,  like  this,  of 
personal  responsibility  in  an  un remunerative  employment. 
They  are  not  very  consistent  inter  se,  nor  do  they  easily  ar- 
range themselves  under  any  distinct  principle. 

(/i)  In  Neal  v.  Moultrie  ^'^  it  was  declared  that  the  liability, 
being  statutory,  was  not  barred  for  twenty  years  ;  and  that  the 
limitations  which  might  run  against  a  fine,  a  forfeiture,  or  a 
penalty  had  no  force  in  this  matter.  Hargroves  v.  Chambers  ^^ 
decided  that,  in  a  suit  against  surviving  directors,  on  the 
ground  that  all  the  directors  had  become  individually  liable,  it 

w  Godbold  V.  Branch  Bank,  11  Ala.  191. 
"  Bank  Commissioners  v.  Bank  of  Buffalo,  6  Paige,  497. 
12  Smith  V.  First  National  Bank,  99  Mass.  605. 
18  German  Savings  Bank  v.  Wulfekuhler,  19  Kans.  60. 
"  12  Ga.  104.  15  30  id.  580. 

264 


LIABILITY.  —  DISSENTING    DIRECTORS,  §128 

was  not  necessary  to  join  the  representatives  of  deceased  direc- 
tors ;  also  that  certificates  of  deposit  payable  on  order  with  in- 
terest from  date  formed  a  part  of  the  corporate  indebtedness  ; 
also  that  neither  waste  of  the  assets  of  the  bank  in  the  hands 
of  the  assignee,  nor  a  judgment  of  forfeiture  of  fran-  Not  relieved 
chisc  pronounced  against  the  bank,  nor  the  expira-  uon  of'diar- 
tion  of  the  bank  charter,  could  operate  to  relieve  the  |n[.,|'(''j"f^r. 
directors  from  tiieir  liability.  It  was  added  as  a  sem-  ftiture. 
ble,  that  they  would  not  be  relieved  by  these  events,  even  if  the 
dissolution  of  the  corporation  discharged  its  indebtedness. 

(z)  Next  we  have  the  case  of  Banks  v.  Darden,^*'  also  de- 
cided in  Georgia,  but  hardly  destined  to  add  much  to  the 
reputation  of  the  learned  bench  of  that  State.  The  charter  of 
the  bank  fixed  the  limit  of  indebtedness,  and  provided  that 
"  in  case  of  excess  the  directors  .  .  .  shall  be  liable  Georgia  iieid 
for  the  same  in  their  private  and  individual  ca-  jlj^^hough' 
pacity."  The  court  held  that  the  provision  was  objecting. 
remedial,  and  not  penal ;  that  the  liability  of  the  directors  was 
joint,  and  not  several ;  and  that  no  single  member  of  the 
board  could  escape  his  responsibility  by  proving  either  his 
absence  from  the  meetings  at  which  the  excess  was  suffered 
to  be  incurred,  or  his  dissent  from  the  action  of  his  co-direc- 
tors. In  discussing  the  last  point,  the  judge  waxes  eloquent 
and  picturesque  in  his  language.  He  imagines  a  director  not 
only  absolutely  innocent  of  collusion  in  the  wrongdoing,  but 
even  laboring  strenuously  though  in  vain  to  obtain  respect 
and  obedience  for  the  law.  But,  he  says,  even  for  this  ill- 
starred  individual  there  is  no  flight  from  the  rigid  vengeance 
of  the  statute.  It  is  indeed  "  a  bloody  legal  picture,"  yet  the 
law  is  inexorable  ;  the  "  pound  of  flesh  must  be  had."  In 
Michigan  the  judges  were  less  Draconic  in  their  interpretation 
of  their  similar  legislation,  and  ventured  to  hold  that  a  di- 
rector was  not  liable  for  an  excess  created  by  a  loan,  to  the 
making  of  which  he  had  objected  at  the  time  when  it  was 
agreed  upon  by  the  board.^" 

(y)    In  Ohio  the  lawgivers  wisely  took  this  matter  into 
their  own  hands,  and  laid  down  specifically  by  what  means, 
"  18  Ga.  318.  "  White  v.  How,  3  McLean,  111. 

265 


§  128  DIRECTORS. 

sucli  as  publication  of  liis  dissent  and  the  like,  a  director  might 
save  himself  from  liability  for  any  action  of  the  re- 
mainder of  the  board.  The  opinion  in  the  cited  case 
was  the  result  of  a  very  careful  consideration  of  the  subject, 
and  deserves  to  be  noticed.  The  statute  provided  that  for  any 
excess  the  "  directors  under  whose  administration  it  should 
hai)pen  should  be  liable  for  the  same  in  their  natural  and  in- 
dividual cai)acity,  in  an  action  of  debt  against  Ihcm  or  any  of 
them."  The  court  held  that  the  remedy  of  the  creditors  was  a 
penal  action,  and  not  one  of  contract;  and  that  tlic  measure  of 
damages  would  be  tiie  amount  of  the  excess  of  liability  created 
by  the  board  of  which  the  defendant  or  defendants  were  mem- 
bers. Tlie  grounds  on  which  this  conclusion  was  based  were  as 
follows  :  1.  The  language  of  the  act  does  not  declare  that  the 
directors  shall  be  personally  liable  on  the  contract  of  indebted- 
ness itself  which  was  created  in  excess  of  the  legal  limit,  but 
solely  for  the  excess  itself.  2.  The  liability  does  not  run  to 
the  persons  holding  the  particular  contract  made  in  excess  of 
the  limit,  but  to  the  creditors  generally  ;  wherefore  the  ground 
of  action  is  clearly  not  the  original  contract.  3.  The  amount 
which  any  creditor  can  recover  is  not  the  amount  of  his  own 
debt,  but  the  amount  of  the  excess  of  the  total  liability  beyond 
the  legal  limit ;  and  this  even  though  his  own  debt  forms  no 
part  of  the  excess.  4.  The  liability  is  provided  for  in  the  man- 
ner customary  in  penal  statutes  to  vindicate  a  violation  of  law. 
5.  The  action  provided  is  the  usual  action  prescribed  by  ])enal 
statutes  to  recover  a  penalty.  6.  The  action  of  the  creditor 
must  be  debt,  whether  his  contract  with  the  bank  be  such  as 
to  authorize  this  form  or  not.  The  court  then  add,  that  they 
consider  that  the  right  to  bring  this  penal  action  is  given  to 
any  one  among  the  creditors  who  may  choose  singly  to  insti- 
tute it,  but  for  the  benefit  of  the  whole  body  of  creditors,  and 
to  create  a  fund  for  the  indemnity  of  all.^^  How  that  fund  is 
to  be  saved  and  applied  for  the  benefit  of  all,  is  a  matter  not 
discussed. 

(Ic)    In  Massachusetts,  a  dissenting  director  avoids 

Mass.  .      . 

liability  by  notice  to  the  bank  commissioners.^^ 
18  Sturges  V.  Burton,  8  Ohio  St.  215.  i^  Pub.  Sts.  676. 

266 


LIABILITY    OF   DIRECTORS.  §  128 

(0  In  Pennsylvania,  where  a  luan  is  made  in  excess  of 
the  legal  limit,  every  director  who  participates  in  or 

o  T  J  ±  L  Penn. 

assents  to  the  wrong  is  personally  responsible  for  the 
damage  directly  consequent  to  the  bank,  the  shareholders,  or 
any  one  elsc.^*^ 

(m)  A  recent  Kentucky  case,^!  Louisville  National  Bank  v. 
Brannin,  contains  an  excellent  discussion  of  the  liability  of 
di  recto  I's. 

The  charter  of  the  "  Exchange  Bank  and  Tobacco  Ware- 
house Co.  of  Louisville  "  i)rovides  that  "  the  indebtedness  of 
the  corporation  over  and  above  that  incurred  for  deposits  of 
money  shall  at  no  time  exceed  their  paid-up  capital  stock." 

During  the  time  that  the  bank  was  indebted  beyond  the 
amount  of  its  paid-up  capital  stock,  the  president,  Harvey,  in- 
dorsed the  name  of  the  bank  upon  three  bills  of  exchange, 
and  they  were  sold  to  appellants,  and  suits  w^ere  instituted 
by  appellants  against  appellees  to  hold  them  personally  bound 
for  the  l)ills.  Appellees  Loving  and  Bronner,  who  were  di- 
rectors, had  no  knowledge  of  the  making  or  negotiation  of  the 
bills. 

"  By  reason  of  the  trustee  character  of  the  bank,  the  great 
facilities  its  officers  have  for  committing  frauds,  the  inability 
of  the  public  to  know  its  condition,  and  the  supreme  control 
the  directors  have  over  its  affairs,  it  becomes  the  duty  of 
the  latter  to  so  conduct  the  business  that  any  misconduct 
cannot  long  continue.  The  banks  conduct  the  business  of 
this  country  so  largely,  and  those  dealing  with  them  are 
compelled  to  rely  on  their  officers  so  implicitly,  that  the  ex- 
traordinary privileges  accorded  to  them  should  be  properly 
exercised. 

"  The  services  of  directors  are,  however,  usually  gratuitous  ; 
they  are  entitled  to  no  compensation  in  the  absence  of  a  con- 
tract for  it,  and  are  only  required  to  exercise  the  same  care 
that  an  ordinarily  prudent  man  would  in  his  own  business  of 
a  like  character. 

*>  Stevens  v.  Monongahela  National  Bank,  88  Pa.  St.  157. 
21  Louisville  National  Bank  v.  Brannin,  Loving,  &  Harvey,  82  Ky. 
870-375  (1884). 

2G7 


§  128  DIRECTORS. 

"The  appellees  Loving  and  Bronncr  had  no  knowledge 
whatever  of  the  making  or  negotiation  of  the  bills  sold  the 
appellants,  and  never  approved  the  same. 

"  The  transactions  were  isolated,  and  the  exercise  of  ordi- 
nary care  upon  their  part  did  not  afford  them  notice,  or  ena- 
ble them  to  stop  them  ;  and,  being  isolated,  it  must  not  be 
presumed  that  they  had  notice  of  them  simply  because  they 
were  directors. 

"  The  appellee  Harvey,  however,  stands  in  a  different 
attitude.  As  to  him  it  is  not  a  question  of  neglect,  but  the 
violation  of  a  known  duty,  and  therefore  a  breach  of  trust 
amounting  to  a  tort. 

"  If  he  did  know  its  condition  and  the  provision  in  its  char- 
ter, and  created  the  indebtedness,  then  he  is  certainly  liable ; 
and  if  he  did  not  have  such  knowledge,  then  there  was  such  a 
want  of  information  as  was  absolutely  necessary  to  the  proper 
performance  of  his  duty,  and  he  is  responsible  for  assuming 
to  act  without  it. 

"  He  assumed  to  act  under  a  charter  containing  a  provis- 
ion so  plain  that  it  could  not  excusably  be  broken  by  him,  and 
when  it  was  his  duty  to  know  the  condition  of  his  company  ; 
and  under  such  circumstances  he  is  equally  as  responsible  as 
if  he  had  been  guilty  of  fraud.  Although  acting  bona  fide, 
he  had  no  right  to  create  the  debt ;  it  was  not  merely  an 
omission,  but  a  positive  violation  of  his  duty,  by  which  an 
innocent  outside  party  is  made  to  suffer,  and  one  who  had 
placed  confidence  in  the  implied  assertion  of  authority  arising 
from  the  making  of  the  paper." 

(n)  The  directors  of  a  bank  are  not  personally  responsible 
to  one  (H.)  from  whom  they  have  in  good  faith  made  an  unau- 
Abeies  v.  tliorizcd  purcliasc  of  stock,  which  the  bank  repudi- 
Cochraii.  atcd.  The  sale  was  illegal  for  lack  of  consent  of 
the  shareholders,  and  the  contract  being  therefore  ultra  vires, 
and  the  bank,  having  received  no  benefit  from  it,  could  not  be 
held. 

H.  sued  the  directors,  claiming  that,  as  they  had  failed  to 
bind  the  bank,  they  were  themselves  bound,  on  the  rule  that 
an  agent  who  goes  beyond  his  authority  binds  himself.  The 
268  ' 


LIABILITIES   OF   DIRECTORS   AS   ASSETS.  §  1-9 

court  said,  that  this  is  by  no  means  a  universal  rule;  the 
first  question  is  always,  between  what  parties  was  tlie  con- 
tract, for  the  law  will  not  make  a  new  contract.  In  this  case 
the  aijjrecmont  was  clearly  understood  to  be  between  the  bank 
and  H.,  and  therefore  the  directors  could  not  b(!  licld  on  the 
contract;  but  if  any  wrong  could  be  imputed  to  the  agents 
they  would  be  liable.  In  the  case  at  bar,  however,  the  direc- 
tors rn.)  were  not  guilty  of  any  misrepresentation;  both  II. 
and  I>.  thought  the  contract  good,  and  the  sources  of  Jj.'s  au- 
thoriti/  7i'ere  as  open  to  If.  as  to  D.  If  an  agent  covenants  per- 
sonally, adding  his  representative  character  which  he  fails  to 
sustain,  he  is  bound  on  the  contract ;  but  if  the  language  does 
not  contain  a  personal  undertaking,  it  is  not  his  contract.'' 
If  he  carelessly  or  knoivinyly  assumes  authority  he  does  not 
possess,  he  is  liable  in  tort ; "  but  in  no  case  where  the  power 
of  judging''  of  the  agency  was  equal  has  the  agent  been  held 
liable  as  the  principal.  ^^ 

§  129.  Claims  against  Directors.  —  If  liability  of  a  director 
once  accrues  for  any  of  the  above  described  species  of  mal- 
feasance in  office,  whether  his  acts  have  been  the  result  of 
dishonesty,  negligence,  or  incompetence,  the  claim  of  the  bank 
against  him  becomes  a  part  of  the  assets  of  the  institution. 
An  assignee,  commissioner,  or  other  party  whomsoever,  who 
may  come  into  possession  of  the  corporate  property  for  the 
purpose  of  collecting  it  and  distributing  it  among  the  credi- 
tors and  sharcholdci-s,  is  obliged  to  regard  the  rights  of  action 
against  such  delinquent  directors  as  a  part  of  the  available 
assets.  It  is  his  duty  to  push  the  claims,  to  make  what  he 
can  out  of  them,  and  to  apply  the  proceeds  together  with  the 
other  funds  of  the  corporation  to  the  discharge  of  its  in- 
debtedness and  the  reimbursement  of  its  creditors  and  share- 
holders. The  suit  may  be  instituted  in  the  corporate  name, 
provided  it  is  stated  that  it  is  instituted  by  order  of  the  re- 
ceiver.i     The  liability  is  at  common  law,  and  though  a  statute 

"  Abeles  i\  Cochran,  22  Kans.  405  (1879).  (See  (r)  Story  on  Agency, 
§§  264  a,  265  a.  (a)  Ogden  t>.  Raymond,  22  Conn.  384.  (A)  Aspinwall  y. 
Torrance,  1  Lans.  381 ;  Sandford  v.  ISIcAuthur,  18  B.  Mon.  411.) 

1  §  129.    Bank  of  Niagara  j;.  Johnson,  8  Wend.  645. 

269 


§  130  DIRECTORS. 

or  charter  may  declare  wliat  acts  of  a  director,  and  under 
what  circumstances  committed,  shall  render  liim  liable,  yet 
these  enactments  will  not  operate  to  alter  the  nature  of  the 
liability,  once  accrued,  or  to  render  it  statutory.  They  must 
be  construed  as  simply  relating  to  evidence,  and  as  declaring 
that  testimony  establishing  the  acts  and  circumstances  de- 
scribed, shall  suflice  to  fix  the  liability  ;  which,  however,  after 
it  has  been  thus  fixed,  will  still  retain  its  original  and  inherent 
common  law  character.  For  this  same  reason  dexterous  and 
subtle  evasions  of  the  language  of  the  statute  will  not  enable 
the  directors  to  frustrate  its  intent,  or  to  shun  a  responsibil- 
ity which  is  fastened  upon  them  by  extrinsic  principles  of  law, 
wholly  outside  the  statute  or  the  charter,  and  existing  quite 
independently  of  either.  Thus,  if  the  statute  declares  that,  in 
case  an  insolvent  or  embarrassed  bank  shall  be  '■'■  comjjelled'''' 
to  make  an  assignment,  then  the  assignee  shall  pursue  his 
rights  of  action  against  the  directors,  and  their  liability  shall 
be  maintained  upon  proof  of  certain  facts  in  their  conduct, 
the  directors  cannot  escape  either  the  obvious  purport  of 
this  legislation,  or  their  common  law  liability,  by  making  a 
voluntary  assignment  before  they  have  been  actually  "com- 
pelled" to  do  S0.2  But  whatever  liability  may  have  been 
incurred  by  all  or  any  of  the  members  of  a  board  of  direc- 
tion, it  will  not  descend  to  their  successors  in  office,  who  are 
blameless  upon  their  own  account.  Neither  will  it  pass  to 
any  third  party  to  whom  they  have  assigned  corporate  projv 
erty,  if  he  took  it  in  good  faith,  without  collusion,  and  for 
vahie.^ 

§  130.  Liability  of  Directors  to  Third  Parties.  —  It  has  been 
said,  that  aside  from  statute  no  bank  officer  is  individually 
liable  to  a  creditor  or  depositor  for  mismanagement,  unless 
his  action  is  malicious  or  fraudulent.^  But  in  the  case  of 
savings  banks,  of  course,  the  officers  are  liable  to  the  depos- 
itors for  lack  of  ordinary  care,  and  in  commercial  banks  the 
better  opinion  is,  that,  though  the  officers  are  liable  only  to 

2  Gunkle's  Appeal,  48  Pa.  St.  13 ;  Schley  v.  Dixon,  24  Ga.  273. 
*  Schley  v.  Dixon,  supra. 
1  §  130.   Fusz  V.  Spaunhorst,  G7  Mo.  257. 
270 


LIABILITY   TO   THIRD    PARTIES.  §  130 

the  bank  for  ordinary  negligence,  tlicy  arc  liable  to  third  par- 
ties for  gross  neglect. 

(a)  The  directors  of  a  bank  arc  trustees  for  depositors,  and 
can  be  held  for  injuries  resulting  from  gross  negligence  on 
their  part  in  allowing  the  bank  to  be  held  out  to  the  public 
as  solvent,  when  it  was  in  fact  insolvent.  Sheldon,  C.  J.,  and 
Craig,  J.,  dissenting.2 

"Ordinarily  the  character  of  the  directory  for  integrity  and 
business  capacity  increases  the  degree  of  confidence  reposed 
in  the  cor|)()ration  by  the  public.     Were  depositors.   Directors 
"when  intrustinii-  to  a  bank  their  entire  fortune,  to   I'a'jie  to  de- 

'  positors  for 

be  informed  that  the  directors,  upon  whose  honor  gross  negii- 
and  careful  watchfulness  they  were  relying,  owed    For  ordinary 
them  no  duty,  were  under  no  obligations  to  take  at   onu-'fiabie 
least  reasonable  precautions  to  guard  their  money   *"  ^^^^' 
from  the  itching  fingers  of  dishonorable  officials,  they  would 
certainly  hesitate  long  before  surrendering  it  upon  such  terms. 
There  are  many  risks  and  uncertainties  against  which  a  pru- 
dent business  man  never  expects  the  directors  or  managers  of 
banks  to  insure  him. 

(6)  "  He  knoivs  that  for  the  usual  hazards  of  business  he 
must  look  to  the  bank  alone,  that  for  the  ordinary/  negligence  of 
directors  they  are  responsible  alone  to  their  principal;  but  for 
such  gross  negligence  or  incompetency  as  shows  a  reckless 
disregard  of  their  duty  to  care  for  and  protect  the  funds  com- 
mitted to  their  charge,  we  think  they  are  directly  responsible 
to  the  depositor." 

The  directors  in  this  case  were  notified  by  the  president, 
ten  months  before  the  failure,  of  his  suspicions  that  Compton 
was  stealing  from  the  bank,  w^hen  the  slightest  examination 
would  have  exposed  the  true  state  of  affairs  and  protected 
subsequent  depositors.  No  examination  whatever  was  made. 
Under  such  circumstances  there  was  clearly  another  duty 
which  the  directors  owed  to  the  community.  If  they  knew 
that  the  bank  was  insolvent,  or  if  their  suspicions  were 
aroused,  and  they  recklessly  closed  their  eyes  and  made  no 
effort  to  discover  the  truth,  it  was  their  duty  not  to  receive 

2  Delano  v.  Case,  12  N.  E.  67G;  17  Brad.  531.    (111.,  Aug.,  18S7.) 

271 


§  130  DIRECTORS. 

the  money  of  depositors  ignorant  of  the  true  state  of  affairs. 
To  do  so  when  they  had  but  a  suspicion  of  the  danger 
would  be  a  great  wrong,  and,  if  with  full  knowledge,  would 
now  be  a  felony.  If  we  are  correct  in  these  views,  it  fol- 
lows that  ap[)ellants  owed  a  duty  to  appellee  which  they 
have  not  performed,  in  consequence  of  which  he  has  been 
injured,  and  for  which  he  ought  to  have  a  remedy ;  for  it  is 
a  maxim  of  the  common  law,  that  a  man  specially  injured 
by  a  breach  of  duty  in  another  should  have  his  remedy  by 
action. 2 

(e)  So  in  Kentucky,  the  directors  were  held  liable  for 
special  deposits  stolen  and  sold  by  the  officers,  since  ordinary 
diligence  on  the  part  of  the  directors  would  have  disclosed  the 
wrongful  sales.2 

(c?)  The  directors  of  an  insolvent  national  bank  cannot  be 
held  for  failure  to  discover  and  prevent  a  series  of  discounts 
of  improperly  secured  paper,  indorsed  by  a  wealthy  director 
who  was  the  largest  stockholder  in  the  bank. 

The  president  of  a  bank  wished  to  resign  on  account  of 
health,  but  was  persuaded  to  retain  his  office  and  take  a  trip 
abroad ;  while  away,  and  without  his  fault,  losses  were  sus- 
tained by  the  bank.  In  a  suit  by  the  receiver  to  charge  the 
directors,  held  that  the  president  was  not  liable,  nor  a  director 
who  had  sold  his  stock  and  orally  resigned  his  office  to  the 
president  before  the  losses.* 

(e)  Directors  of  a  national  bank  cannot  be  held  to  a  com- 
mon law  liability  for  inattention  to  duty  in  not  preventing  a 
hazardous  loan,  made  without  their  connivance  or  knowledge. 
Nor  can  the  officers  of  an  insolvent  national  bank  be  held 
liable  to  creditors  for  losses  on  loans  made  by  them  in  good 
faith,  merely  because  such  loans  seem  unwise  and  perilous 
when  looked  back  upon.^ 

(/)  Managers  of  a  savings  bank  may  be  liable  if  they  par- 
Savings  bank  ticipatc  in  or  promote  prohibited  acts  causing  loss, 
managers.      q^.  j£  ^j^^^,  i^Qgigct  to  bcstow  duc  care,  whereby  their 

8  United  Society  v.  Underwood,  9  Bush,  GOO. 
*  Movins  V.  Lee,  30  Fed.  R.  298  (May,  1887). 
5  Witters  v.  Sowles,  31  Fed.  R.  1  (July,  1887). 
272 


LIABILITY   OF   DIRECTORS.  §  131 

associates  arc  not  restrained,  or  are  enabled  to  do  those  acts 
which  prove  disastrous  to  the  institution.^ 

It  is  competent  to  consider  the  course  of  conduct  when 
certain  managers  were  present  in  order  to  decide  if  they  are 
liable  fur  similar  conduct  of  their  associates  in  their  absence. 

§  131.  Personal  Liability  of  one  held  out  as  a  Director.  —  The 
owners  of  a  State  bank  for  mure  than  four  }-ears  published 
an  advertisement  of  the  bank,  containing  the  names   ^, 

"  Hume  V. 

of  persons  (A.,  B.,  &c.)  as  directors  who  had  never   Commercial 
accepted  the  office,  or  acted  as  directors,  or  done 
or  said  anything  to  lead  creditors  to  believe  that  they  were 
directors.     The  bank  failed,  and  it  was  decided  that  the  credi- 
tors could  not  hold  such  persons  as  directors.^ 

(rt)  Freeman,  J.  dissented,  thinking  A.,  B.,  &c.  had  es- 
topped themselves  by  allowing  an  official  notice  by  the  bank 
of  its  organizing  with  them  for  directors.  It  was  notice  of  a 
business  organization,  inviting  public  patronage  on  the  basis 
of  confidence  in  those  parties,  and  when  parties  stand  by  and 
permit  the  public  to  be  notified  for  years  that  they  are  man- 
agers of  such  an  institution  until  it  is  insolvent,  they  should 
not  escape  the  responsibility  justly  attaching  to  such  a  position 
announced  to  the  world.  They  assented  to  the  advertisement 
as  fully  as  if  they  had  authorized  it. 

(?))  There  is  an  immense  confusion  in  the  cases  upon  this 
subject  of  the  personal  responsibility  of  one  held  out  as  being 
in  a  position  of  responsibility,  resulting,  I  think, 
from  the  alternate  or  mingled  application  of  two 
principles.  To  put  a  penalty  on  conduct  likely  to  lead  to 
unsound  credit,  and  to  hold  A.  responsible  for  loss  resulting 
from  unsound  credit  actually  given  by  his  fault,  —  that  is,  to 
hold  that  A.  shall  make  good  to  B.  and  C.  the  credit  A.'s 
conduct  has  led  them  really  to  give  him,  —  are  two  very  dif- 
ferent matters.  If  the  judge  follows  the  first  line  of  thought 
he  will  hold  A.,  whether  the  plaintiff  knew  that  A.  had  al- 
lowed himself  to  be  held  out  or  not.^    If  he  acts  on  the  second 

«  Dodd  V.  Wilkinson,  9  Atlantic  R.  685  (N.  J.,  June,  18S7). 
^  §  131.    Hume  v.  Commercial  Bank  of  Kuoxville,  9  Lea,  728. 
8  Young  V.  Axtell,  24  Black,  242. 
VOL.  I.  18  273 


§  132  DIRECTORS. 

ground,  the  defendant  will  only  be  liable  when  the  plaintiff 
knew  that  A.  was  so  held  out,  or  the  holding  out  was  under 
such  circumstances  of  publicity  as  to  satisfy  the  jury  that  the 
plaintiff  knew  of  it,  and  believed  A.  to  be  really  a  partner  or 
director,  or  in  such  other  position  as  the  holding  out  would 
indicate.^ 

It  would  seem  that  the  only  proper  ground  in  a  civil  suit 
would  be  the  second,  for  no  person  should  recover  for  injury 
to  others,  but  only  to  himscK,  and  must  show  that  the  defend- 
ant's conduct  has  really  caused  him  loss.  The  repression  of 
conduct  injurious  to  the  public  is  a  matter  for  the  State,  al- 
though until  the  State  wakes  up  to  the  matter  it  may  be  very 
well  for  the  judges  to  apply  the  just  penalty  in  the  best  way 
they  can ;  as  giving  to  some  innocent  person  a  little  more 
than  his  just  due,  or  relieving  one  from  the  consequence  of 
his  own  error  of  judgment  in  trusting  a  firm,  is  probably  a 
less  evil  to  the  community  than  allowing  conduct  subversive 
of  sound  credit  and  good  faith. 

§  132.  False  statements  of  the  Condition  of  the  Bank.  —  It 
often  happens  that  the  officers  of  corporations  put  forth  dccei> 
tive  and  fraudulent  reports,  and  make  false  statements  con- 
cerning its  affairs,  in  order  to  keep  up  its  good  repute  with 
the  public,  and  to  sustain  or  raise  the  price  of  shares  by 
attracting  purchasers.  As  our  banking  corporations  are  con- 
ducted at  present  under  the  National  Banking  Act,  deception 
cannot  be  easily  effected  by  such  artifices.  Indeed,  miscon- 
duct of  this  kind  seems  always  to  have  been  rare  in  the 
banking  institutions  of  our  own  country,  and  most  of  the 
cases  are  English.  The  bank  in  its  corporate  capacity  can 
never  be  held  to  answer  for  any  species  of  fraud  or  deception 
of  this  nature  practised  by  any  of  its  directors  or  other  offi- 
cers individually,  though  at  the  banking-house  and  in  banking 
hours.  No  single  director,  neither  any  other  official,  has  it 
within  the  scope  of  his  customary  authority  to  bind  the  bank 
by  any  representations  whatsoever  made  concerning  its  con- 
dition  or   affairs.     The   bank   does   not   hold   them   out   as 

8  Dickinson  v.  Valpy,  10  B.  &  C.  140;  Carter  v.  Whalley,  1  B.  &  Ad. 
11;  Alderson  v.  Pope,  1  Camp.  404. 
274 


MISREPRESENTATIONS.  §  132 

competent  to  give  information  of  this  character,  and  any 
person  who  relics  on  statements  thus  received  puts  his  confi- 
dence in  the  individual  from  whom  the  statements  proceed ; 
and  though  he  may  have  a  good  cause  of  action  against  him, 
it  is  against  him  as  a  private  individual,  and  not  as  an  oflicer 
of  the  bank,  and  can  by  no  means  be  against  the  bank  itself. 

(a)  The  corporation  can  only  be  held  liable  if  it  publishes 
corporate  reports,  as  such,  falsely  and  with  criminal  intent. 
Such  would  be  a  statement  adopted  at  a  general  when  bank 
meeting  of  the  directors  and  intentionally  put  forth  "^  ^"*'^'°- 
to  the  public,  or  left  to  reach  the  community  in  the  ordinary 
course  of  business. 

(ft)  Where  the  directors  have  been  assisted  in  the  prepara- 
tion of  their  deceptive  or  fictitious  statements  by  any  subordi- 
nate officers,  these  officers  will  be  under  the  same 

1  ,.    ,  .,.  .     ,.    .,      ,    ,.  Officers'  per- 

personal  liability  as  the  individual  directors,  though  sonai  lia- 
the  directors  alone  have  signed  the  document.^  The  ' '  ^' 
tendency  in  England  seems  to  be  generally  to  hold  the  direc- 
tors liable  if  possible,  and  statutory  enactments  come  to  the 
aid  of  this  tendency  with  thorough  provisions  and  stringent 
punishments.  Thus  directors  and  any  officer  in  collusion  with 
them  are  liable  to  indictment  for  conspiracy  to  defraud  by  the 
publication  of  false  balance-sheets  and  the  circulation  of  false 
reports  as  to  the  condition  and  solvency  of  the  bank ;  or  the 
issuing  and  offering  for  sale  new  stock,  at  a  time  when  they 
know  the  bank  to  be  insolvent.^  So  again  they  were  held 
criminally  responsible  for  representing  the  affairs  of  the  com- 
pany to  be  prosperous,  and  declaring  large  dividends,  when 
in  fact  the  bank  was  embarrassed.^ 

In  a  New  York  case,'^  one  count  alleged  that  a  falsehood 
concerning  the  amount  of  stock  actually  subscribed  and  paid 
in  had  been  uttered  by  the  defendant,  as  director,  together 

1  §  132.  Cullen  v.  Thompson,  4  ]\Iacq.  H.  L.  Cas.  431;  9  Jur.  n.  s.  85; 
Ex  parte  Frowde,  9  W.  R.  328;  3  L.  T.  n.  s.  843;  Re  Royal  British  Bank, 
Ex  parte  Nichols,  5  Jur.  n.  s.  205;  28  L.  J.  n.  s.  257. 

2  Regina  v.  Esdaile,  1  F.  &  F.  213;  Grant  on  Bankers  and  Banking, 
p.  543,  and  cases  cited. 

8  Burnes  t'.  Pennell,  2  H.  L.  C.  497. 
■*  Mabey  v.  Adams,  3  Bosw.  34G. 

275 


§  133  DIRECTORS. 

with  the  other  directors,  in  the  articles  of  association,  whereby 
tlic  plaintiff  had  been  induced  to  buy  shares.  The  court  said 
that  it  was  diflicult  to  understand  how  a  director  could  be 
individually  chargeable  for  false  statements  in  the  articles  of 
association,  which  necessarily  preceded  in  order  of  time  the 
election  of  directors  ;  or  how  such  articles  could  have  the 
character  of  a  continuing  false  representation  by  every  di- 
rector who  might  subsequently  come  into  the  board,  so  as 
to  give  a  right  of  action  against  him  to  every  one  there- 
after purchasing  stock.  Tlie  second  count  alleged  that  the 
defendant  falsely  and  fraudulently  represented  to  the  plaintiff 
that  the  shares  were  actually  worth  par  or  over,  whereby  the 
plaintiff  was  induced  to  purchase.  In  order  to  sustain  this 
count  it  was  necessary  to  make  out  a  good  cause  of  action 
against  the  defendant  in  his  individual  capacity.  As  director 
he  could  not  be  charged  with  knowledge  of  the  value  of  the 
stock.  But  at  any  rate  the  pleading  was  fatally  defective  in 
failing  to  allege  that  the  misrepresentations  were  made  with 
the  intent  to  deceive  the  plaintiff.  The  whole  statement  of 
the  count  might  be  true,  and  yet  this  intent  might  have  been 
absent ;  and  tlie  allegation  and  proof  of  the  intent  are  a  sine 
qua  non  to  a  recovery.  The  principles  laid  down  in  this 
decision  are  unquestionably  correct.  Yet  as  the  professional 
man  studies  the  case  he  will  be  obliged  to  regret,  either  that 
it  was  so  wofully  misunderstood  or  mismanaged  by  the  plain- 
tiff's counsel,  or  that  it  was  so  clumsily  reported.  One  or  the 
other  of  these  misfortunes  has  robbed  it  of  much  of  its  value 
as  an  authority. 

§  183.  Notice  to  the  Board.  —  It  is  a  question  of  frequent 
occurrence  and  considerable  moment,  under  what  circumstan- 
ces a  bank  will  be  affected  with  notice  of  a  fact  which  has 
not  been  actually  and  formally  notified  to  its  assembled  direc- 
torial board.  It  is  not,  of  course,  indispensable  that  a  formal 
statement  should  be  made  to  the  board  at  its  regular  meet- 
ing. A  discussion  or  open  mention  of  the  matter  there, 
however   introduced,   is   amply    sufficient.^      But   where   the 

1  §  133.  Bank  of  Tittsburg  v.  Whitehead,  10  AVatts,  397.  In  this  case 
it  was  noted  as  a  quaere  whether  publication  in  a  newspaper  subscribed 

276 


NOTICE  TO   DIRECTORS.  §  134 

information  remains  the  private  knowledge  of  a  portion  only 
of  those  present,  it  is  important  tu  know  when  the  knowl- 
edge of  this  portion  will,  and  when  it  will  not,  be  consid- 
ered to  be  the  knowledge  of  the  bank.  Knowledge  once 
received  by  any  board  of  directors  is  in  law,  however  it 
may  be  in  fact,  retained  by  every  subsequent  board,  and  the 
bank  will  be  affected  by  it  without  a  repetition  of  the  com- 
munication.2 

What  the  directors  ought  to  have  known  by  proper  dili- 
gence as  to  the"  general  course  of  the  bank's  business,  they 
are  presumed  to  have  known  in  a  contest  between  the  bank 
and  third  persons  dealing  with  it  in  good  faith.^ 

§  134.  Notice  to  a  Single  Director.  The  question  whether 
it  is  just  to  hold  the  bank  bound  by  the  knowledge  of  a  single 
member  of  a  composite  agency  unless  he  decides  the  vote  or 
action  of  the  body,  is  discussed  above,  §  112. 

The  general  rule  actually  adopted  is  as  follows.  If  the 
director  acquired  it  in  his  official  capacity,  or  in  the  course  of 
or  in  relation  to  any  special  matter  or  function  of   ^       ,    , 

•'       '■  General  rule 

which  he  had  charge  as  an  agent  of  the  bank,  then  as  actually 
he  knows  it  as  a  director,  and  the  law  holds  that 
the  bank  also  knows  it.  If  he  acquired  it,  however,  solely 
as  any  other  private  individual  might  have  acquired  it,  and 
not  officially,  or  in  connection  with  his  discharge  of  the 
functions  of  his  office,  or  if  it  did  not  relate  to  any  matter  in 
which  he  owed  a  peculiar  duty  to  the  bank,  he  does  not  know 
it  as  director,  and  the  bank  does  not  know  it  by  implication 
from  his  knowledge,  except  when  he  afterward  acts  for  the 
hank  having  such  knowledge  presumably  still  present  in  his 
mind  at  the  time  he  acts  in  the  matter  to  which  it  relates, 
and  having  no  adverse  interest  to  keep  him  from  fulfilling 
his  duty  by  communicating  his  information   to   the   bank  ; 

for  by  the  bank  would  operate  as  constructive  notice  to  the  bank.  It  is 
hardly  probable  that  such  a  notion  could  be  sustained;  it  is  going  much 
too  far. 

2  Mechanics'  Bank  of  Alexandria  v.  Seton,  1  Pet.  299;  Fulton  Bank 
I'.  New  York  &  Sharon  Canal  Co.,  4  Paige,  127. 

8  Martin  v.  Webb,  110  U.  S.  7. 

277 


§  134  DIRECTORS, 

or,  if  lie  has  such  adverse  interest,  then  to  hold  the  bank 
two  facts  must  coexist ;  viz.  the  party  C.  in  controversy  with 
the  bank,  or  the  one  on  whose  right  he  stands,  must  have  been 
aware  that  the  director  possessed  the  knowledge,  and  not 
aware  of  the  adverse  interest. ^     §  136. 

The  knowledge  of  the  single  director  must  be  actual,  not 
merely  constructive.     §  135. 

(rt)  Many  cases  have  arisen  wherein  the  interpretation 
of  the  courts  has  been  called  in,  not  to  determine  the  rule, 
but  to  declare  whether  or  not  the  circumstances  bring  the 
case  within  the  one  or  the  other  division  of  the  rule.  The 
question  is  whether  the  law  will  endow  the  receiver  of  the 
knowledge  with  an  official  and  directorial  character,  or  only 
with  his  private  and  individual  personality  at  the  time  when 
he  came  by  the  information  in  question.  It  is  by  no  means 
easy  to  establish  any  definite  test  by  which,  as  by  a  touch- 
stone, all  doubtful  cases  can  be  at  once  and  infallibly  solved, 
and  arrayed  upon  the  one  or  the  other  horn  of  the  dilemma. 
Nothing  better  can  be  done  than  to  give  brief  abstracts  of  ten 
or  twelve  from  among  the  cited  cases,  selected  with  a  view  to 
showing,  as  well  as  may  be,  the  tendency  of  the  courts  in  such 
causes. 

(i)  In  Bank  of  the  United  States  v.  Davis  a  bill  of  ex- 
change was  forwarded  to  one  who  was  a  director  in  the  bank, 
with  the  request  that  he   would   procure   a  discount   upon 

1  §  134.  Custer  v.  Tompkins  County  Bank,  9  Barr,  27;  National  Bank 
V.  Norton,  1  Hill,  572  (a  leading  authority) ;  Bank  of  United  States  v. 
Davis,  2  id.  451;  Fulton  Bank  v.  Benedict,  1  Hall,  480;  Fulton  Bank  v. 
New  York  &  Sharon  Canal  Co.,  4  Paige,  127 ;  Washington  Bank  v. 
Lewis,  22  Pick.  24;  Loomis  v.  Eagle  Bank  of  Rochester,  Disney,  285; 
Bank  of  Pittsburg  v.  Wiiitehead,  10  Watts,  397;  Louisiana  State  Bank 
V.  Senecal,  13  La.  525;  Powles  v.  Paige,  3  C.  B.  25;  15  L.  J.  C.  P.  217; 
In  re  Carew,  31  Beav.  39.  See  The  Distillery  Spirits,  11  Wall.  356; 
National  Bank  v.  Cushman,  121  Mass.  490;  Fairfield  Savings  Bank  v. 
Chase,  72  Me.  226;  Anketel  v.  Converse,  17  Ohio  St.  11 ;  Hart  v.  The 
F.  &  M.  Bank,  33  Vt.  252 ;  Bluraenthal  v.  Brainard,  38  Vt.  410;  Hay- 
ward  V.  National  Ins.  Co.,  52  Mo.  181;  Dresser  v.  Norwood,  17  C.  B. 
N.  s.  466.  But  Pennsylvania  holds  notice  to  an  agent  twenty-four  hours 
before  the  agency  no  more  notice  to  the  principal  than  if  it  came  twenty- 
four  hours  after  the  agency  ceased.     81  Pa.  St.  256. 

278 


NOTICE   TO    DIRECTORS.  §  134 

it.     He   did  so ;    but  at  the  meeting  which  made   ^^,^^^^  ^._ 
the  loan,  he  was  present  and  ioined  in  all  the  pro-   rector  acts, 

p,i         iiTiiiji        T  i.     bauk  held. 

ccedings,  and  there  falsely  alleged  that  the  discount 
was  for  his  own  benefit,  and  dishonestly  received  the  money. 
It  was  held  that  the  Ixink  was  affected  with  knowledge  of 
the  fraud,  and  could  not  recover  the  amount  of  the  Ijill  from  the 
defrauded  party.  The  court  said  that  it  was  not  true  that  the 
director  was  not  acting  at  the  time  on  the  behalf  of  the  l)ank. 
He  was  present,  consulting,  advising,  doubtless  recommending 
the  loan  upon  this  very  paper,  all  in  his  capacity  as  director, 
an(i  it  is  fair  to  suppose  that  his  influence  as  a  director  pro- 
cured this  discount.  It  is  urged  that  he  was  only  one  of  five 
directors  engaged  in  the  transaction.  But  the  bank,  having 
employed  several  agents  to  transact  jointly  a  particular  busi- 
ness, is  equally  responsible  for  the  conduct  of  each  and  of  all. 
The  duty  of  any  one  of  them  to  communicate  his  knowledge 
is  as  obligatory  as  if  he  were  a  sole  agent.^  It  will  be  seen 
from  the  language  of  tliis  decision  how  inextricably  the  mat- 
ter of  notice  is  intertwined  with  the  principle  of  holding  the 
bank  liable  for  the  default  of  its  agent  committed  within  the 
scope  of  his  duty.  Indeed,  the  rule  may  be  expressed  in  the 
language  of  the  latter  principle  as  correctly  as  in  any  other 
form, — thus:  Whatever  knowledge  a  director  acquires  tvithin 
the  scope  of  Ms  official  emploijment,  he  is  bound  to  communi- 
cate to  his  co-directors,  that  is  to  say,  to  the  bank  itself.  If 
he  neglects  to  dc  so,  the  bank  is  liable  for  the  neglect  of  its 
agent  to  perform  the  duty  of  his  agency.  By  either  road  the 
same  conclusion  is  arrived  at,  which  is  the  liability  of  the 
bank  to  the  same  extent  as  if  it  had  known  what  its  director 
knew  and  what  he  ought  to  have  communicated.  It  may  be 
said  that  it  is  chargeable  with  his  knowledge,  received  within 
the  scope  of  his  agency  and  employment ;  or  it  may  be  said 
that  it  is  chargeable  with  the  result  of  his  neglect  to  perform 
the  duty  of  communication  imposed  upon  him  by  his  agency 
and  employment.  Practically,  it  matters  little  which  course 
is  chosen,  or  whether,  as  in  the  foregoing  case,  an  effort  is 
made  to  combine  both. 

2  2  Hill,  N.  Y.  451. 

279 


DIRECTORS. 


In  North  River  Bank  v.  Aymar  the  director  -was  present 
and  did  act  in  his  olhcial  character,  and  in  prosecution  of  his 
Director  directorial  agency.  It  was  there  hekl  that,  if  the 
acted.  j^Qte  of  a  firm  were  discounted  by  a  bank,  one  of 

the  directors  who  was  present  and  acted  concerning  the  dis- 
count being  also  a  member  of  the  firm,  and  having  knowledge 
of  facts  tending  to  invalidate  the  note,  the  bank  would  be 
affected  with  his  knowledge  and  chargeable  with  notice.^ 

§  135.  The  Knowledge  of  the  Director  must  be  Actual.  —  A. 
was  director  in  a  bank,  and  a  member  of  the  discount  com- 
mittee ;  he  was  also  president  of  a  corporation,  one  of  whose 
agents  had  such  knowledge  of  certain  infirmities  in  a  note 
discounted  by, the  bank  as  affected  this  corporation  with 
knowledge.  Held,  that  the  bank  was  not  affected  by  this 
merely  constructive  knowledge  of  its  director.^ 

§  13G.  If  the  Director  having  Notice  does  not  act  in  the  Mat- 
ter, or  is  known  by  the  Third  Party  to  be  adverse  to  the  Bank's 
Interest,  the  information  he  has  is  not  imputed  to  the  bank. 

In  Terrell  v.  The  Branch  Bank  at  Mobile,^  the  opinion, 
though  not  emanating  from  a  leading  bench,  is  eminently 
sound  and  keen  ;  and  the  contrast  with  Bank  v.  Davis  is  well 
worth  examination.  A.  signed  a  promissory  note  in  blank, 
and  gave  it  to  B.,  a  director  in  the  defendant  bank,  with  direc- 
tions to  fill  it  up  with  the  sum  of  "  five  hundred  dollars,"  and 
to  use  it  in  renewal  of  A.'s  note  for  the  same  amount  already 
held  by  the  bank.  B.  filled  it  up  with  a  larger  sum,  and  had 
it  discounted  for  his  own  benefit.  He  was  present  at  the 
meeting  of  the  board  which  made  the  discount,  but  of  course 
he  did  not  disclose  the  truth.  In  this  case  his  knowledge 
was  not  held  to  affect  the  bank,  and  A.  was  obliged  to  pay 
upon  the  note  the  amount  fraudulently  filled  in.  The  two 
cases  seem  strikingly  alike  in  their  facts,  yet  the  opposite  de- 
cisions in  them  respectively  seem  equally  satisfactory.  The 
point  at  once  of  reconcilement  and  of  difference  lies  in  this 
fact.     The  fraud  in  Bank  v.  Davis  was  committed  by  the  direc- 

8  North  Kiver  Bank  v.  Aymar,  3  Hill,  262. 

1  §  135.    Mann  v.  Second  National  Bank  of  Springfield,  34  Kans.  746. 
1  §  136.    12  Ala.  502. 
280 


NOTICE  TO   DIRECTORS.  §  13G 

tor,  or  at  least  the  first  steps  in  it  were  taken  l)y  him,  when 
he  was  acting  oflicially  and  on  behalf  of  the  bank,  and  witiiin 
tlie  scope  of  his  agency  for  the  bank  ;  his  undisclosed  knowl- 
edge of  the  truth  therefore  affected  the  bank,  for  he  possessed 
his  knowledge  officially  ;  the  fraud  in  the  second  case  was 
committed  by  the  director  as  an  individual,  when  he  was  act- 
ing as  agent  for  A  in  a  matter  in  which  A  had  specially  com- 
missioned and  intrusted  him  to  act ;  his  knowledge  of  the 
truth,  therefore,  was  his  private  knowledge,  and  not  the  knowl- 
edge of  the  bank  ;  for  he  did  not  possess  it  officially.  In  each 
case,  the  principal  in  whose  business  the  director  was  agent  for 
the  time  being,  and  within  the  scope  of  his  agency  for  whom 
he  committed  the  fraud  and  possessed  a  knowledge  of  the  truth 
which  he  did  not  disclose,  was  obliged  to  suffer  the  penalty  of 
his  breach  of  his  trust,  and  to  make  good  his  fraud. 

(a)  In  Loomis  v.  Eagle  Bank  of  Rochester,^  a  bank  director 
was  payee  of  a  note,  a  part  of  which  the  makers  claimed  the 
right  to  recoup  by  reason  of  an  alleged  breach  of  contract  be- 
tween themselves  and  the  payee.  The  director  transferred  and 
indorsed  over  the  note  to  the  bank  for  value  and  in  Director 
due  course  of  business,  but  without  informing  them  bank. 
of  the  claim  of  the  makers.  It  was  held  that  the  claim  could 
not  be  sustained  as  against  the  bank.  The  knowledge  of  him 
who  was  at  once  payee  and  director  was  not  the  knowledge  of 
the  bank.  He  did  not  come  by  it  or  possess  it  officially.  The 
court  remarked  that  to  insist  that  the  private  knowledge  of  any 
director  should  bind  the  bank  would  work  indefinite  mischief 
in  business. 

In  Washington  Bank  v.  Lewis,^  a  director  procured  the 
discount  of  a  note  which  was  afterwards  disputed  for  fraud. 
The  defence  was  not  considered  good.  But  this  case  is  to 
be  distinguished  from  the  case  of  Bank  of  the  United  States 
V.  Davis  ;  for  whereas  in  that  case  the  director  had,  at  least 
presumably,  acted  as  a  director  in  procuring  the  loan,  in  the 
])rcsent  case  the  court  distinctly  state  that  it  was  because  he 
did  not  act  officially  in  the  making  of  the  loan,  but  simply  ap- 
plied for  and  obtained  it  as  any  other  person,  wholly  an  out- 
2  Disney,  285.  »  22  Pick.  24. 

281 


§  136  DIRECTORS. 

sider,  would  and  must  have  done,  that  the  defence  cannot  be 
sustained. 

(6)  The  two  cases  differ  from  each  other  in  precisely  the 
vital  point ;  —  in  the  former,  the  director  had  knowledge, 
Director  did  within  the  scopc  of  his  agency,  which,  since  he 
Bank^not  actcd  in  the  prosecution  of  his  agency,  he  was 
bound.  bound   to  communicate,  and  which  was  therefore 

in  law  the  knowledge  of  the  bank  ;  in  the  latter  case  the  di- 
rector, having,  in  fact  or  presumably,  the  same  species  of 
knowledge,  explicitly  refrained  and  declined  to  exercise  his 
official  agency  in  the  matter,  but  dealt,  as  he  had  a  right  to 
do,  with  the  other  directors  wholly  in  the  character  of  an  out- 
side negotiator  and  contractor  ;  since  he  was  not  acting  in  his 
agency,  it  followed,  unavoidably,  that  he  owed  no  duty  to  the 
bank,  and  that  his  knowledge  was  private,  not  corporate,  in 
its  character. 

Where,  in  absence  of  a  director  by  whom  a  note  has  been 
offered  for  discount,  the  bank  accepts  it,  and  accepts  as  col- 
Absent  di-  lateral  a  note  payable  to  him  and  indorsed  to  it  as 
knowledge.  Collateral,  the  bank's  rights  are  not  affected  by  his 
knowledge  of  illegality  in  the  inception  of  the  note  accepted 
as  security.^ 

(c.)    A  cashier  wishing  to  procure  of  the  bank  money  to 

buy  railroad  stock,  agreed  with  H.,  a  third  party,  who  knew 

that  a  rule  of  the  bank  forbade  its  officers  to  be- 

Ga. 

The  party       comc   its  dcbtors,  to  buy  two   hundred   shares  of 

dealing  with  .ft  r   j.i 

the  cashier  stock,  the  casliicr  to  advaucc  to  11.  money  oi  tne 
actTngad-^^  bank  to  pay  therefor,  H.  to  give  his  note  to  the 
verseiy.  ]jq^i^]^  for  the  moucy,  and  deposit  the  stock  as  col- 
lateral security.  This  was  done,  and  the  cashier  assumed  pay- 
ment of  the  note,  the  stock  being  his.  The  bank  had  no  notice 
of  this  arrangement  except  the  cashier's  knowledge.  H.  after- 
wards advised  the  cashier  to  sell  the  stock,  and  the  cashier 
agreed  that  H.  might  use"  his  own  discretion  therein.  H. 
thereupon  effected  a  sale,  but  the  cashier  refused  to  confirm 
it  or  to  deliver  the  stock. 

In  an  action  by  the  bank  on  II.'s  note,  the  court  held  that 
*  Third  National  Bank  of  St.  Louis  v.  Harrison,  3  McCrary,  316  (1882). 
282 


NOTICE   TO    DIRECTORS.  §  130 

the  bank  was  not  concluded  by  the  cashier's  knowledge.  He 
acted  adversely  to  the  bank,  and  the  third  party  in  the  dealing 
knew  it.^ 

{d)  The  law  has  been  laid  down  in  Massachusetts  to  the 
same  effect,  where  a  director  borrowed  money  from  his  own 
bank.  It  seems  that  in  such  a  transaction  the  Mass. 
director  is  to  be  regarded  as  acting  in  his  indcpen-  ingTdvcrse- 
dent  and  individual  capacity,  and  not  on  behalf  or  £„S'y"h?3 
for  the  interest  of  the  bank,  for  he  is  in  fact  the  knowledge. 
other  party  to  the  contract,  and  naturally  must  be  expected 
to  look  out  for  himself,  and  to  assume  to  a  certain  extent 
the  character  of  an  adversary  in  the  bargain.  A.  shipped 
sugar  to  B.,  with  authority  to  B.  to  sell  it  in  due  course  of 
business  for  a  long  while  conducted  between  them.  The  bill 
of  lading  stated  the  shipment  to  be  made  by  order  of  B., 
and  that  the  sugar  was  deliverable  to  his  order,  with  no  words 
indicative  of  agency  on  his  part.  B.  indorsed  this  document, 
and  pledged  it  as  collateral  security  for  a  loan  which  he  ne- 
gotiated with  a  bank  of  which  he  was  a  director ;  and  he  him- 
self was  present  at  the  meeting  of  directors  which  passed 
upon  the  loan.  It  was  held,  in  an  action  by  A.  against  the 
bank,  that  the  bank  could  not  be  charged  with  the  knowledge 
of  the  director  that  his  act  was  fraudulent.*' 

(g)    In  Shaw  v.  Clark  a  note  was  discounted  by  a  bank.     It 
was  claimed  that  one  of  the  directors,  E.,  knew  the  ^jj^,^ 
note  was  upon  a  gaming  consideration.     E.  recom-   Director  did 

r  o  n  jjot  (fft^  and 

mended  the  discount,  but  did  not  "  act "  nor  "  con-  the  bank 

,,       ,      ,        ,  -     .  ,  .  .,         not  bound. 

trol  the  discretion"  of  the  board  in   making   the 
discount.     The  court  held  that  the  bank  was  not  charged  with 
his  knowledge.^ 

(/)  A  note  was  obtained  from  the  maker  by  fraud.  P.,  a 
director  of  the  bank  discounting  the  note,  had  notice  of  the 
fraud,  but  did  not  communicate  his  knowledge  to  n.  j. 

'  •      7  7  •       Director  did 

any  other  bank  officers,  neither  did  he  take  part  m  not  act. 

6  Savannah  Bank  &  Trust  Co.  v.  Hartridge,  73  Ga.  223  (1884). 
•5  Tiinerarity  v.  Merchants'  National  Bank,  139  Mass.  332. 

7  Shaw  r.  Clark,  49  Mich.  384  (1882);  National  Security  Bank  v. 
Cushman,  121  Mass.  490. 

283 


§  137  DIRECTORS. 

the  discounting^  wherefore  his  information  did  not  affect  the 
bank.^ 

If  a  director  is  not  present  and  acting  at  the  discount  of  a 
note,  his  knowledge  of  illegality  or  want  of  consideration  is 

not  notice  to  the  hank  ;  but  if  he  acts  with  the  board 

the  bank  is  held  by  his  knowledge.^ 
(/y)    The  knowledge  of  usurious  taint  in  negotiable  paper 
acquired  by  a  director,  but  not  while  acting  for  the  bank,  is 

not  thereby  the  knowledge  of  the  bank  ;  and  as 
Director  did    said  dircctor  did  not,  while  having  such  notice,  do 

any  act  for  the  bank  in  respect  to  such  paper,  the 
bank  is  in  no  way  affected  by  his  information.^'^ 

The  same  distinction  is  taken  in  a  case  where  one  of  the 
directors  who  did  not  act  at  the  discounting  had  notice  of  ir- 
regularities attaching  to  the  note.  The  bank  was  not  affected 
with  notice. ^^ 

§  137.  Director  chargeable  with  Knowledge  as  against  him- 
self.—  The  converse  of  the  doctrine  just  discussed  is  much 
more  simple.  Whatever  knowledge  a  director  has  or  ought 
to  have  officially,  he  has,  or  will  be  conclusively  presumed  at 
law  to  have,  as  a  private  individual.  In  any  transactions  with 
the  bank,  either  on  his  own  separate  account  or  where  others 
are  so  far  jointly  interested  with  him  that  his  knowledge  is 
their  knowledge,  he  and  his  joint  contractors  will  be  affected 
by  this  knowledge  which  he  has,  or  which  he  ought,  if  he  had 
duly  performed  his  official  duties,  to  have  acquired.^  Thus,  a 
director  is  affected  with  notice  of  the  condition  and  transac- 

«  First  National  Bank  of  Plightstown  v.  Christopher,  40  N.  J.  L.  435 
(1878). 

9  North  River  Bank  v.  Aymar,  3  Hill,  2G2;  National  Security  Bank 
t'.  Cushman,  121  Mass.  490  ;  Farmers'  Bank  v.  Fayne,  25  Conn.  444 ; 
The  President  r.  Corwin,  37  N.  Y.  320;  Commercial  Bank  v.  Cunningham, 
24  Pick.  270;  Washington  Bank  v.  Lewis,  22  Pick.  24;  Ilousatonic  Bank 
V.  Martin,  1  Met.  294. 

10  Atlantic  State  Bank  v.  Savery,  82  N.  Y.  291. 

11  National  Park  Bank  v.  German  Mutual  W.  &  Security  Co.,  53 
N.  Y.  Superior  Ct.  367. 

1  §  137.  Lyman  v.  United  States  Bank,  12  How.  225;  1  Blatch,  C.  C. 
297. 

284 


NOTICE   TO    DIRECTORS.  §  137 

tions  of  the  bank,  of  its  legal  rights,  and  of  the  action  of  its 
directorial  board  on  any  subject.  If  the  bank  is  insolvent,  or 
if  it  offers  him  for  purchase  notes  which  could  only  be  legally 
sold  by  authority  of  a  directorial  vote  which  has  never  been 
given,  he  is  affected  with  knowledge  of  the  insolvency,  and  of 
the  illegality  of  the  notes.  He  cannot  collect  upon  them  from 
the  bank,  on  the  ground  of  presumed  regularity,  as  a  bona 
fide  outside  purchaser  of  them,  without  notice  and  for  value, 
could  do.'-^ 

If  a  director  of  a  bank  is  surety  on  a  note,  or  if  a  director  is 
a  partner  in  a  firm  which  is  surety  on  a  note,  held  by  the 
bank,  the  surety  will  be  affected  with  knowledge  of  the  pay- 
ment or  nonpayment  of  the  note  without  regard  to  any  state- 
ment made  by  the  cashier.  A  director  is  chargeable  with  this 
amount  of  knowledge  of  the  affairs  of  the  bank,  whether  in 
fact  he  has  it  or  not,  and  cannot  escape  any  responsibility 
which  such  knowledge  properly  entails.'^ 

In  the  discussion  of  this  topic  a  brief  abstract  of  the  case  of 
Curtis  V.  Leavitt  should  not  be  omitted.*  Bank  directors 
authorized  the  issue  of  bonds  to  certain  trustees  for  sale.  The 
officers  whose  duty  it  was  to  make  the  issue  assigned  the 
bonds  to  persons  other  than  those  named  as  trustees,  and  also 
to  an  amount  in  excess  of  that  authorized.  Their  action  in 
the  latter  particular,  however,  was  subsequently  ratified  by 
the  corporation.  One  of  the  persons  acting  as  a  trustee  was 
also  a  director.  The  court  declared  the  assignment  valid  for 
the  benefit  of  bona  fide  purchasers  of  the  bonds  for  value  and 
without  notice,  and  that  the  knowledge  possessed  by  him  who 
combined  the  positions  of  director  and  trustee,  that  the  as- 
signment was  in  fact  without  due  authority,  did  not  make  the 
purchasers  of  bonds  under  the  trust  chargeable  with  a  like 
knowledge.  It  is  clear  from  the  language  of  the  court,  that, 
if  the  director  and  trustee  had,  in  his  latter  capacity,  been 
the  real  party  in  interest,  instead  of  only  a  trustee  nominally 
representing  entirely  innocent  third  parties,  the  decision  would 

2  Gillet  V.  Phillips,  3  Kern.  lU. 

8  Merchants'  Bank  v.  Rudolf,  5  Neb.  527. 

*  15  N.  Y.  9. 

285 


§  138  DIEECTORS. 

have  been  to  the  contrary  effect.  So  that  this  case  at  once 
proves  the  general  doctrine,  and  furnishes  a  valuable  specimen 
of  exception  to  it. 

It  is  not  a  conclusive  presumption  that  a  director  knows  the 
circumstances  under  -which  a  bank  takes  a  note.  B.,  a  direc- 
tor, bought  a  note,  not  knowing  that  the  payee  had  delivered 
it  to  the  bank  without  indorsement  as  collateral  security.  In 
a  suit  against  the  maker,  it  was  held  that  B.'s  directorship 
did  not  affect  him  with  notice.^ 

§138.  Qualifications  of  Directors.  —  A  method  frequently 
resorted  to  for  securing  the  fidelity  of  directors  in  the  exer- 
cise of  their  duties  is  to  require  them  to  own  in  their  own 
right  and  unincumbered  a  certain  number  of  the  shares  of 
the  corporation.  Imperfect  as  this  must  be  as  a  check  upon 
men  of  large  property,  it  is  perhaps  the  best  available  plan. 
It  has  been  adopted  in  our  National  Banking  Act,  which  de- 
clares (sect.  9)  that  each  director  shall  own  at  least  ten 
shares  of  the  corporate  stock.  This  regulation,  however,  sim- 
ply prescribes  the  requisite  qualification  for  election  to  the 
office.  If  a  person  not  thus  qualified  is  elected,  and  seeks  to 
enter  upon  the  office  without  qualifying  by  the  purchase  of 
the  requisite  number  of  shares,  he  may  be  ousted  by  legal  pro- 
cess. But  his  acting  as  a  director  will  not  make  him  in  any 
manner  liable  for  this  number  of  shares.  Neither  can  he  be 
regarded  either  at  law  or  in  equity,  or  for  any  purposes,  as 
the  constructive  owner  of  them.  His  entering  upon  the  en- 
joyment of  the  office  does  not  in  any  case  estop  him  from 
alleging  his  non-ownership  of  the  requisite  number  of  shares 
to  qualify  him  for  the  position.^  The  cases  cited  show  that, 
in  England,  where  a  person  who  had  subscribed  for  twenty- 
five  shares  was  chosen  a  director,  and  acted  as  such,  though 
the  ownership  of  fifty  shares  was  required  by  law  in  order  to 
qualify  him  for  the  position,  yet  he  could  be  held  liable  as  a 
contributor  only  for  the  price  of  the  twenty-five  shares,  though 
the  company  was  insolvent  and  the  creditors  were  sufferers. 

6  Baldwin  v.  Proctor,  82  hid.  370. 

1  §  138.   Ex  parte  Marquis  of  Abercorn,  31  L.  J.  Ch.  828;  Ex  parte 
Roney,  33  id.  731. 
286 


DIRECTORS.  §  140 

A  stronger  or  more  conclusive  case  than  this  one  could  not 
be  desired. 

§  130.  Continuance  in  Office. —  It  is  a  common  proviso  that 
directors,  once  chosen,  shall  remain  in  office  until  a  choice  of 
successors  has  been  made.  It  is  a  useful  and  convenient  pre- 
caution, by  which  accidental  or  unavoidable  intervals  are 
bridged  over  without  an  interregnum,  than  which  nothing 
could  be  more  injurious  to  the  interests  of  the  bank.  Tliough 
the  original  term  of  office  be  limited  to  one  year,  yet  it  may 
be  indefinitely  prolonged  under  this  provision.  The  irregu- 
larity in  failing  to  make  a  choice  in  due  season  may  subject 
the  corporation  to  statutory  penalties  ;  but  this  is  a  different 
matter,  and  does  not  touch  the  tenure  of  office  of  the  old 
board.  The  rule  and  its  working  are  usually  simple  enough, 
and  we  have  found  only  one  case  where  litigation  has  arisen 
under  it.  Here  choice  of  a. board  of  directors  was  made,  but 
the  company  was  hopelessly  insolvent.  It  was  not  formally 
dissolved,  but  no  business  whatsoever  was  undertaken  by  it 
for  sixteen  years  thereafter.  It  was  held  that  the  last 
chosen  directors  could  not  be  regarded  as  continuing  in  office 
throughout  this  period,  on  the  ground  that  no  choice  of  suc- 
cessors had  relieved  them.  Their  neglect,  not  objected  to, 
to  perform  any  official  duty  in  so  long  a  time,  was  construed 
as  equivalent  to  their  abandonment  or  resignation  of  their 
position.! 

But  the  mere  fact  that  the  bank  is  insolvent  or  bankrupt 
does  not  vacate  the  office  of  director.^ 

§  140.  Pay  of  Directors  for  Services. — Ordinarily  the  posi- 
tion of  director,  whether  in  a  bank  or  any  other  corporation, 
is  not  one  entitling  the  incumbent  to  demand  compensation 
for  his  services.  Usage  is  so  uniformly  to  the  effect  that  the 
services  are  rendered  gratuitously,  that  an  especial  contract 
or  vote  could  alone  enable  a  director  to  demand  pay  as  a  legal 
right.  Nor  could  even  a  formal  vote  confer  upon  him  this 
right,  if  it  were  not  passed  until  after  the  rendition  of  the  ser- 
vices.    For  it  would  then  become  invalid  on  the  ground  of 

1  §  139.    Bartholomew  v.  Bentley,  1  Ohio  St.  37. 

2  Holland  v.  Heymau,  60  Ga.  174  (1S7S). 

287 


§  140  DIRECTORS. 

want  of  consideration.^  So  it  has  been  held  that  a  director, 
who  was  receiving  no  compensation,  could  not  recover  from 
the  bank  a  reward  offered  by  it  for  the  recovery  of  money 
stolen  and  the  detection  of  the  thief.  For  it  was  only  a  part 
of  the  legal  duty  imposed  by  his  office  to  give  all  the  informa- 
tion upon  these  points  which  he  might  succeed  in  acquiring. 
But  the  principle  applies  only  to  the  services  performed  by 
directors  in  the  execution  of  their  directorial  functions.  For 
services  rendered  prior  to  their  becoming  directors  they  may 
properly  be  paid.  So  also  for  services  in  any  special  duty  or 
agency  wholly  outside  of  the  ordinary  duty  or  agency  of  a 
director,  they  are  entitled  to  pay  upon  the  principle  of  quan- 
tum meruit.^  If  a  peculiar  and  especial  task  is  undertaken  by 
a  director  at  the  request  of  the  board,  which  he  is  under  no 
obligation  to  undertake  simply  because  he  is  a  director,  and 
which  he  could  not  reasonably  be  expected  or  required  to  un- 
dertake gratuitously  after  the  fashion  of  his  ordinary  direc- 
torial functions,  neither  justice  nor  any  judicial  decisions 
oppose  his  receiving  or  requiring  just  compensation  for  the 
labor.2  But  in  Alabama,  where  pay  was  allowed  to  directors 
of  the  State  Bank,  and  the  amount  was  fixed  by  law,  it  was 
declared  that  no  additional  pay  could  be  allowed  for  extra 
services  rendered  during  incumbency  in  the  office.*  The  fact 
that  regular  pay  was  given  takes  this  case  out  of  the  opera- 
tion of  the  general  rule.  It  was  probably  considered  that  the 
pay  was  intended  to  buy  all  such  services  as  the  directors 
should  undertake,  or  be  able  or  called  upon  to  render,  whether 
strictly  within  their  ordinary  duties  or  not.  If  the  duty  was 
unusual,  so  also  was  the  receipt  of  any  salary  at  least  equally 
unusual. 

1  §  140.  Hall  V.  Vermont  &  Tilassachusetts  R.  R.  Co.,  28  Vt.  401 ; 
Pierson  r.  Thompson,  1  Edw.  Ch.  212;  Loan  Association  v.  Stouemetz, 
29  Pa.  St.  534;  Godbold  v.  Branch  Bank,  11  Ala.  191;  Dunston  v.  Im- 
perial Gas  Co.,  3  B.  &  Ad.  125. 

*  Stacy  V.  State  Bank,  4  Scamm.  91. 

8  Branch  Bank  v.  Collins,  7  Ala.  95;  Chandler  v.  Monmouth  Bank, 
1  Green,  255. 

4  Branch  Bank  at  Mobile  v.  Collins,  7  Ala.  95 ;  Branch  Bank  v.  Scott, 
id.  107. 

9«« 


DIRECTORS.  §  141 

(a)    If  the  directors  are  guilty  of  misconduct  they  forfeit 
all  right  to  compensation.     As  against   the  holders  of  the 
bank's  notes,  and  other  creditors  of  the  bank,  the   Misconduct 
trustees  are  entitled  to  no  compensation  ;  as  against    >"  » transac- 

*  "      .  tion  forfeits 

the  stockholders,  whose  wishes   they  had  carried   pay  for  ser- 
out,  a  different  rule  might  apply,  did  not  the  prin- 
ciple of  public    policy  intervene,  denying  compensation  to  a 
trustee  who  has  shown  bad  faith  toward  the  public.^ 

§  141.  Records.  —  Records  of  the  proceedings  of  the  board 
of  directors  are  good  at  law,  although  not  taken  at  the  time 
of  the  meeting.  They  may  be  made  at  any  time  subsequently, 
and  relate  back.^ 

6  Moses  V.  OcoU  Bank,  1  Lea,  398. 

1  §  141.  Commercial  Bank  v.  Bonner,  13  Sm.  &  M.  649. 

VOL.  I.  19  289 


CHAPTER  X. 

THE    PRESIDENT. 

§  142.     Analysis. 

Authority.     §§  98,  114,  151. 
§  143.  Inherent,  confined  to  charge  of  bank's  litigation. 

(d)  May  enter  remittitur  for  sufficient  consideratiou. 
§  144.         {/)  May  give  a  receipt  for  securities  deposited. 
May  certify  checks.     §§  155  d,  413. 
(g)    Ma.y  agree  on  a  place  of  payment  otlier  than  that  named  in  a 

note, 
(n)   And  may  bind  the  bank  in  other  ways,  where  the  usage  of  banks 
and  routine  of  business,  or  the  custom  of  tlie  particular  bank, 
give  him   implied  authority,  or  wliere   lie  has  authority  ex- 
pressly by  the  charter  or  vote  of  directors,  or  where  he  has 
publicly  done  a  series  of  acts  of  a  certain  character  without 
objection  from  the  bank,  or  where  his  act  has  been  ratified  by 
the  bank,  as  by  long  acquiescence. 
§  145.        (c)  For  example,  the  president  may,  by  custom,  have  power  to  take 
a  debt  due  from  the  bank  out  of  the  statute. 
Duty.     §§  114,  125,  151. 
§  143.  To  preside  at  board  meetings,  and  give  careful  supervision  to 

the  affairs  of  the  bank. 
No  Power  inherent.     §§  125,  127,  671. 
§  144.         (b)    To  draw  chocks  against  the  bank's  funds. 

ij)    Or  to  indorse  negotiable  paper  belonging  to  the  bank. 

{b)    Or  to  control  its  finances. 

(b)    Or  to  settle  with  creditors. 

(b)    Or  to  dispose  of  or  control  tlie  bank's  property  any  more  than 

any  other  director. 
(?)    Or  to  certify  his  own  check. 
(c,  h)    Or  to  release  a  claim  or  stay  execution,  though  by  long  acquies- 
cence in  such  act  the  bank  is  bound. 
(d)   Or  to  contract  for  the  bank,  though  lie  may  bind  the  bank  by 
express  or  implied  authority.     See  above,  (a),  and  Chap.  VIII. 
(k)    Cases  in  which  a  narrower  doctrine  as  to  the  president's  contract 

power  was  held. 
(/)     Statutory  authority. 

(m)  Authority  given  to  president  and  cashier  construed  strictly. 
§  145.     Representations  and  Admissions.     §§  42  c.  2,  103, 124,  167,  168,  203. 
(a)   Made  within  the  scope  of  his  agency  (i.  e.  while  transacting  busi- 
ness for  which  he  has  authority,  either  express  or  implied) 
bind  the  bank. 

290 


THE   PRESIDENT.  §  143 

§  145.   (b)    No  inherent  autliority  to  release  debt  by  admission. 

{(1)  Nor  to  charf^e  the  bank  with  a  debt. 

(c)  By  usage,  his  acknowludginent  at  tiie  bank  or  away  from  it  may 
take  a  debt  out  of  tlie  statute. 

(e)  Not  made  as  agent  for  the  bank,  in  its  business  do  not  affect  the  bank. 
§  146.    Knowlkdge  of  the  President.     §  'J,  n.  9,  §§  104,  133,  IGG. 

(a)  His  knowledge  of  an  indorser's  address  is  the  bank's  knowledge, 

and  though  lie  may  be  accidentally  absent,  the  bank  is  not  excused 
for  failure  to  notify. 

(b)  Notice  of  suit  is  properly  served  on  president,  though  away  from 

bank. 

(c)  President's  knowledge  that  a  payment  to  bank  is  in  fraud  of  the 

bankruptcy  laws  is  imputed  to  the  bank. 
§  147.   Liability  of  the  President  to  the  Bank  for  Breach  of  Trust. 
§§  70,  128,  120,  717  c;  II.  §§  63,  153. 
(a)  Passing  bank's  money  to  an  irresponsible  person. 
(()   Selling  property  without  authority. 

(c)   Statute  of  Limitations  only  begins  to  run  against  the  bank  from  the 
time  it  discovers  the  fraud. 
§  148.   Liability  of  One  held  out  as  President.     §  130. 
§  149.   Personal  Undertakings  fob  the  Benefit  of  the  Corpobation. 
§  150.  Pay  of  the  President. 

§  143.  President's  Authority  Virtute  Officii.  —  The  president 
of  the  bank  is  usually,  perhaps  universally,  a  member  of  the 
board  of  directors,  and  is  customarily  chosen  by  the  board  from 
their  own  number.  Sections  8  and  9  of  our  National  Banking 
Act  prescribe  this  method  for  all  banks  organized  under  it. 
It  is  the  duty  of  the  president  to  preside  at  meetings  of  the 
board  of  directors.  The  amount  and  nature  of  the  duties 
imposed  upon  him  may  vary  in  different  associations  accord- 
ing to  the  usages  or  the  by-laws  of  each.  But  ordinarily  the 
position  is  one  of  dignity,  and  of  an  indefinite  general  respon- 
sibility, rather  than  of  any  accurately  known  power.  The 
president  is  usually  expected  to  exercise  a  more  constant, 
immediate,  and  personal  supervision  over  the  daily  affairs  of 
the  bank  than  is  required  from  any  other  director. 

(a)  Usage  or  directorial  votes  may  confer  upon  him  special 
functions,  and  may  extend  his  authority  to  correspond  with 
the  increase  of  active  duties.     But  the  authority  in-   ,  , 

•'  Inherent 

herent  in  the  office  itself  is  very  small ;  indeed,  it  is   authority 
very  difficult  to  say  precisely  how  or  wherein  it  is 
really  much  in  excess  of  that  which  can  be  exercised  by  any 

291 


§  143  THE  PRESIDENT. 

other  single  director.  Practically  this  legal  principle  is  not 
known,  or  not  distinctly  recognized,  in  very  many  banks,  and 
frequently  presidents  undertake  to  exercise  a  very  considerable 
control  in  the  daily  routine  of  business.  When  this  is  done 
with  the  knowledge  and  approbation,  or  the  tacit  sanction,  of 
the  board  of  directors,  it  may  be  regarded  as  legalized  by  the 
principles  of  ratification  or  usage.  Yet  these  afford  an  indefi- 
nite and  dangerous  basis  on  which  to  rest  important  dealings. 
A  careful  collation  of  all  the  adjudicated  cases,  it  must  be 
confessed,  wears  a  striking  and  peculiar  aspect,  which  is  not 
very  favorable  to  the  assumption  of  any  species  of  executive 
power  by  a  bank  president  without  direct  authorization.  With 
Cases  nearly  scarccly  an  exception,  all  the  decisions  are  to  the 
all  negative",  effect  that  the  president  had  no  right  to  perform 
some  particular  act,  which  he  had  undertaken  probably  in 
perfectly  good  faith  to  perform,  and  which  had  been  called  in 
question,  and  had  given  rise  to  the  litigation  in  which  it  was 
condemned.  So  the  reader  will  notice  that  in  discussing 
this  topic  we  are  obliged,  in  order  to  keep  within  the  bounds 
of  established  law,  to  confine  ourselves  almost  wholly  to 
declaring  what  a  president  can  not  do. 

(6)  Indeed,  it  is  a  singular  fact  that  the  entire  collection 
of  judicial  authorities  justifies  the  enunciation  of  only  one  act 
as  falling  within  the  properly  inherent  power  of  the 
baSnti-     president.     This  solitary  function  is  to  take  charge 
gation.  ^^  ^j^^  litigation  of  the  bank.     Tliere  is  no  question 

that  this  matter  belongs  to  him  by  virtue  of  his  office.  He 
may  institute  and  carry  on  legal  proceedings  to  collect  de- 
mands or  claims  of  the  -bank.  He  may  appear,  answer,  and 
defend  in  suits  against  the  bank.  He  may  retain  and  employ 
counsel  on  behalf  of  the  bank.  Counsel  requested  by  him  to 
act  for  the  bank  will  bind  it  by  their  action  in  the  case,  within 
the  ordinary  powers  of  counsel,  by  sole  authority  of  their  en- 
gagement by  him.  Nor  will  it  make  any  difference,  though 
circumstances  render  that  engagement  originally  wrong  or 
improper.!    This  would  be  his  own  breach  of  trust  towards  the 

1  §143.    Savings  Bank  of   Cincinnati  v.  Benton,  2  Met.   (Ky.)  240; 
American  Ins.  Co.  v.  Oakley,  9  Paige,  496 ;  Mumford  v.  Hawkins,  5  Den. 
292 


AUTHORITY.  §  144 

bank,  committed  within  the  scope  of  his  authority,  damages 
for  which  the  bank  could  only  recover  from  himself,  and  which 
could  affect  no  innocent  outside  parties,  whether  these  should 
be  the  counsel  employed,  or  the  other  litigants  in  the  cause. 

((?)  The  National  Banking  Act  docs  not  specify  the  powers 
of  president  or  cashier.  They  are  held,  therefore,  to  have 
only  such  powers  as  are  inherent  in  such  positions  by  the  very 
nature  of  things.  All  other  powers  are  left  to  the  directors. 
The  president  is  generally,  if  not  always,  a  member  of  the 
board  of  directors,  and  it  is  his  duty  to  preside  over  their 
meetings.  He  has  inherently  only  one  power  beyond  that  of 
any  other  director,  viz.  charge  of  the  bank's  litigation.^ 

(d)  A  bank  president  may,  on  sufficient  consideration, 
contract  with  the  defendant  in  a  judgment  in  favor  of  the 
bank  to  enter  a  remittitur.^ 

§  144.     (a)    Where  the  President   has  no   Inherent  Power,  he 
binds  the  bank  in  many  cases  by  usage  or  express  authority. 
The  cases,  though  largely  occupied  in  deciding  that   j„  ^^^^, 
a  president  has  no  authority  by  virtue  of  his  office,   ^^',^^1^*"^ 
vet  hold  the  bank  bound  by  his  action  wherever   president, 

•'  •'  though  he 

the  charter,  or  a  vote  of  the  directors,  or  usage   has  no  in- 
of  the  bank,  or  long  acquiescence  by  the  bank  in  a   to  act  in  the 
course  of  action  by  the  president,  or  any  facts  con-  "''^^^'■• 
stituting  a  holding  out  of  the  president  by  the  bank  as  having 
a  right  to  act  for  it,  lay  a  foundation  for  authority  actual  or 
inferred,  and  whenever  the  bank  has  ratified  his  action. 

(6)  The  control  of  the  president  of  a  bank  over  its  property 
of  any  description  whatsoever,  from  real  estate  down  to  a 
naked  right  to  bring  an  action  at  law,  is  of  the  no  inherent 
slightest.  He  has  no  power  to  draw  checks  in  |^ank.'s*'proV 
its  behalf,  or  against  its  funds.  He  is  not  the  ^'■*.^'- 
executive  officer  who  has  charge  of  its  moneyed  operations. 
It  is  not  among  his  functions  to  withdraw  or  remove  its 
deposited   funds,  or   to  use   them   for  any  purpose  whatso- 

355;  Oakley  v.  Workingmen's  Benevolent  Society,  2  Hilt.  487;  Alexan- 
dria Canal  Co.  v.  Swann,  5  How.  83. 

2  Hodges,  Executor,  v.  First  National  Bank,  22  Gratt.  51. 

8  Case  V.  Hawkins,  53  Ala.  702  (1876). 

293 


§  144  THE   PRESIDENT. 

ever.  ITc  cannot  even  employ  any  portion  of  the  assets  or 
credits  of  the  bank  for  paying  or  settling  with  its  creditors, 
unless  by  virtue  of  an  express  delegation  of  authority  from 
the  directors.  He  has  no  more  power  of  management  or  dis- 
posal over  the  property  of  the  corporation  than  any  other 
single  member  of  the  board.^  These  remarks,  of  course,  refer 
to  his  inherent  powers  enjoyed  virtute  officii;  for  of  course,  if 
any  resolution  or  any  established  usage  gives  him  the  power, 
either  at  all  times  or  under  special  circumstances,  to  draw 
against  the  corporate  deposits,  he  may  do  so  within  tlie  limits 
of  the  power.  Thus,  in  a  Tennessee  case,  a  usage  was  shown 
for  the  })resident  to  draw  checks  when  the  cashier  was  absent, 
and  the  judges  went  the  length  of  holding  that  he  might 
legally  do  so  in  the  absence  of  the  regular  cashier,  even 
though  a  cashier  pro  tern,  had  been  chosen.^ 

When  the  general  management  of  the  affairs  of  the  bank  is 
left,  as  is  customary,  with  the  directors,  the  president  has  not 
power  to  mortgage,  assign,  or  pledge,  any  more  than  he  has 
to  dispose  otherwise  of  any  of  its  property  of  any  description 
whatsoever,  or  for  any  purpose,  however  proper  and  justifiable 
in  itself.^  In  the  case  in  Selden's  Reports  the  court  say :  "  In 
Massachusetts  it  has  been  held  that  neither  the  president  nor 
the  cashier  has  power,  virtute  officii,  to  transfer  negotiable 
funds,  without  express  authority  from  the  directors.  This, 
however,  must  be  erroneous,  if  the  transfer  be  made  in  the 
usual  course  of  business,  and  bona  fide.  But  it  is  safe  to  say 
that,  when  the  sale,  assignment,  or  transfer  requires  the  use  of 
the  corporate  seal,  it  cannot  be  made  without  the  assent  and 
authority  of  the  board."  However  reluctant  we  may  be  to 
confess  that  the  learned  judge  correctly  interpreted  the 
opinion  of  the  Massachusetts  court,  it  cannot  be  denied  that 

J  §  144.    Gibson  v.  Goldthwaite,  7  Ala.  281. 

2  Neiffer  v.  Bank  of  Knoxville,  1  Head,  162;  Fulton  Bank  v.  New 
York  &  Sharon  Canal  Co.,  4  Paige,  127.  But  as  to  when  the  bank  is 
justified  in  paying  on  the  signature  of  the  president,  see  chapter  on 
Chocks. 

8  Iloyt  V.  Thompson,  1  Seld.  320;  Leggett  ».  New  Jersey  Manufactur- 
ing &  Banking  Co.,  Saxt.  Ch.  542. 
294 


AUTHORITY.  §  144 

Ills  amcndmont  thereof  and  the  doctrine  laid  down  by  him  are 
correct.  ]>ut  this  is  by  no  means  necessarily  to  be  construed 
as  extending  the  power  of  the  president  to  the  performance 
of  any  of  the  acts  specified.  The  judge  says  only  that  the 
president  or  cashier  must  be  able  to  do  them,  and  certainly 
the  cashier  is  able  to  do  them.  Equally  certain  it  is  that 
there  is  no  authority  whatsoever  for  supposing  that  the  in- 
tention was  to  declare  the  president  also  able  to  do  them. 

(c)  The  same  species  of  limitation  upon  the  power  of  the 
president  forbids  him  to  surrender  or  release  *  claims  of  the 
bank  against  any  person,  from  whatsoever  source   cannot  re- 
arising;  or  to  stay  the  collection  of  an  execution   oTstayS 
against   the   estate   of   a   judgment    debtor.     For   ^ution. 
either  of  these  acts  is   the  exercise  of  a   discretionary  au- 
thority over  the  affairs  and  property  of  the  bank,  which  is 
the  peculiar  and  exclusive  province  of  all  the  directors.^ 

(f?)  The  president,  unless  specially  empowered,  cannot  en- 
ter into  contracts  or  agreements  on  behalf  of  the  corporation. 
Authority  so  to  do  may,  however,  be  conferred  on  no  inherent 
him  by  the  charter,  by  vote  of  the  board  of  direc-  ^oiTtract^for 
tors,  or  by  the  existence  of  such  facts  as  constitute  ^^'^^• 
a  public  holding  out,  and  warrant  the  public  in  believing 
that  the  undertaking  is  within  the  scope  of  his  legitimate 
delegated  authority.^ 

The  president  of  a  savings  bank,  having  authority  to  carry 
on  its  general  business,  is  not  virtute  officii  em-  xo  power  to 
powered  to  borrow  money  on  its  behalf.^"  borrow. 

((.')  Where  one  transacts  business  or  enters  into  contracts 
or  agreements   with   the   president   of   the   bank,  which   in 
form  run  between  the  person  upon  the  one  part,   \vhen  presi- 
and   the   president,  described   as   such,   upon   the    tnict^ds 
other,  if  it  was  understood   by  the  party  at  the   '^^'^'^• 

*  Olney  v.  Chadsey,  7  R.  I.  224. 

*  Ibid. ;  Brouwer  v.  Appleby,  1  Sandf.  158;  Spyker  v.  Spence,  8  Ala.  333. 
6  Mt.  Sterling  Turnpike  Co.  r.  Looney,  1  Met.  (Ky.)  550;   Farmers' 

Bank  v.  McKee,  2  Pa.  St.  318. 

^^  Fifth  Ward  Savings  Bank  v.  First  National  Bank,  47  N.  J.  Eq. 
357  (1885). 

295 


§  144  THE   PRESIDENT. 

time  that  he  was  in  fact  dealing  or  agreeing  with  the  bank, 
if  he  acted  upon  this  supposition  in  good  faith,  if  the  presi- 
dent had  from  any  source  authority  to  bind  the  bank  in  such 
a  transaction,  and  especially  if  the  bank  actually  receives 
whatever  benefit  may  accrue  from  it,  —  then  there  can  be  no 
doubt  that  the  bank  could  be  held  to  perform  whatever  was 
undertaken  on  its  behalf  by  its  presidents  But  if  the  presi- 
dent was  acting  beyond  the  scope  of  any  authority  derived 
from  his  office,  or  from  directorial  votes,  or  from  usage,  then 
his  act,  except  of  course  by  virtue  of  a  subsequent  ratili cation, 
could  not  bind  the  bank.  Even  where  the  president  does  not 
designate  himself  as  such,  yet  the  circumstances  of  the  trans- 
action may  be  put  in  evidence,  to  show,  so  far  as  they  may  be 
able,  that  he  was  in  fact  acting  in  his  official  capacity ;  and 
if  this  be  established,  the  failure  to  designate  himself  for- 
mally by  his  official  title  will  not  affect  the  binding  force  of 
the  transaction  upon  the  bank.  But  if  the  dealing  was  with 
him  as  an  individual,  not  as  an  officer,  the  bank  has  nothing 
to  do  with  the  affair.  Thus  where  one  gave  money  to  a  bank 
president,  who  signed  a  receipt  for  it  "  to  be  deposited  in  the 
bank  to  the  credit  of  A."  and  signed  the  receipt  simply  with 
his  name  alone,  it  was  held  that  the  facts  were  admissible  to 
go  to  the  jury  for  what  they  might  be  worth  as  tending  to 
show  that  tlie  money  was  paid  to  and  received  by  the  presi- 
dent in  his  official  capacity  on  behalf  of  the  bank ;  but  that 
they  were  by  no  means  conclusive  of  this,  and  that  if  the  jury 
should  find  that  the  money  was  intrusted  to  the  president  as 
a  private  individual  simply  for  the  convenience  of  getting  him 
to  deposit  it  on  behalf  of  A.,  then  he  was  A.'s  agent,  and  if  he 
failed  to  make  the  deposit  regularly  and  honestly,  it  was  his 
individual,  not  his  official  default,  and  the  bank  was  not 
liable.^  Precisely  to  the  same  effect  was  the  decision  in 
Terrell  v.  Branch  Bank.^  Though  the  officer  receiving  the 
money  was  in  this  case  a  director,  the  principle  of  law  is 
identical  in  the  two  rulings. 

">  Tremont  Bank  v.  Taine,  28  Vt.  24. 

8  Sterling  v.  Marietta  &  Susquehanna  Trading  Co.,  11  Serg.  &  R.  179. 

9  12  Ala.  502. 

296 


AUTHORITY.  §  144 

(/)  Government  securities  were  given  to  a  bank  president 
to  exchange ;  he,  using  bank  paper,  gave  a  receipt,   When  presi- 

,  .  T  'i.    J.  ii         dent's  act  is 

Signing  his  own  name.      In  a  suit  to  recover  the   that  of  the 
value   of  the   securities,  the  act  of  the   president   ii""ejU 
was  held  the  bank's  act.^^ 

{g)  The  president  of  a  bank  may,  without  special  authority, 
agree  with  the  payor  of  a  note,  or  an  agent,  to   Mayaf,Tee 
receive  the  money  at  another  place  than  that  desig-   money  on 
nated  in  the  note  for  payment,  to  forward  it  to  the   place  other 
bank  where  the  note  is  held  and  payable. ^^  named.^  °"^ 

(/i)  W.,  a  director  of  a  bank,  owed  it  a  note  of  -flOOO,  and 
held  f'lOOO  of  its  stock.     T.,  the  president,  agreed   cannot  dis- 
with  him  to  buy  the  stock  for  himself,  received  it  charge  a 

•'  ,  .  .  .  debtor  of  the 

from   him,  handed   it  to   the   cashier,  instructing   bank,  even 
him  to  hold  it  in  place  of  W.'s  note  and  to  surren-   snbstitutes 
der  the  note  to  W.,  saying  that  he,  T.,  would  pay    ""^'^"^ 
the  amount  to  the   bank.     The  cashier   received  the  stock, 
stamped  the  note  paid,  and  surrendered  it  to  W.     Held,  that 
the  bank,  not  having  ratified  the  transaction,  was  not  bound 
by  it,  and  that  it  did  not  discharge  W.'s  liability  upon  the 
note.^^ 

But  where  a  president  released   the  lien   of  a  judgment, 
the   long   acquiescence   of    the    bank   was   held   a   Acquies- 
ratification.^-'^  ^^"^• 

(i)  A  president  cannot  certify  his  own  check ;  such  certifi- 
cation is  on  its  face  notice  of  fraud  to  all.^^ 

(y)  The   president  has  no  inherent  power  to  indorse  or 
transfer  negotiable  paper   belonging  to  the  bank,   indorsement 
but  such  authority  may  be  implied  from  his  habit   ^a^ft  k^own 
of  doing  acts  of  the  same  general  character,  known   *"  '^*^^''^- 
to  the  directors.^^ 

One  receiving  a  note  from  a  president  who  has  no  authority 

10  Van  Leuven  v.  First  National  Bank  of  Kingston,  54  N.  Y.  671. 
"  Vilas  National  Bank  of  Plattsburafh  v.  Strait,  58  Vt.  448. 

12  Rhodes  V.  Webb,  24  IMinn.  292  (1877). 

13  Winton  v.  Little,  94  Pa.  St.  64  (1880). 
1*  Clafflin  V.  Bank,  25  N.  Y.  293. 

"  Smith  V.  Lawson,  18  W.  Va.  212  (1881). 

29T 


§  144  THE  PRESIDENT. 

to  transfer  it  is  not  a  bona  fide  holder,  though  he  supposes 
the  president  to  have  such  power,  such  supposition  being  a 
mistake  of  law.^^ 

(k)  Such  is  the  general  doctrine,  forbidding  any  species  of 
contract  to  be  made  by  a  president  on  behalf  of  his  bank. 
„      .  But  in  some  few  cases,  such  as  will  occasionally 

Cases  in  '  •' 

whicii  a  liar-  arisc,  in  which  the  special  contract  could  be  con- 
rower  doc-  .,.,., 

trine  was  dcmncd  as  mvalid  without  the  necessity  of  mak- 
&ii  icien  .  .^^^  ^^^  prohibition  against  contracting  at  all  quite 
so  sweeping  and  absolute,  the  courts  have  contented  them- 
selves with  holding  that  a  president  cannot  bind  the  bank 
ill  any  unusual  manner,  or  in  any  undertaking  lying  outside 
of  its  customary  routine  of  business.  Upon  this  narrower 
ground  have  been  based  rulings :  (1)  That  a  bank  president 
has  no  right  to  agree  to  receive  deposits  of  monc}^  on  interest, 
it  not  being  a  part  of  the  ordinary  business  of  banking  to  do 
so.^^  (2)  That  the  president  cannot  charge  the  bank  with 
any  greater  liability  for  the  safety  of  a  special  deposit  than 
the  bank  is  wont  to  undertake  for  such.^"  To  the  same  prin- 
ci])le  may  be  also  referred  the  ruling  that  the  promise  of  the 
president  and  cashier  that  an  indorser  shall  not  be  liable  on 
his  indorsement  does  not  bind  the  bank,  though  it  may  be  so 
specific  as  to  bind  the  president  and  cashier  as  individuals. 
An  agreement  so  contrary  to  the  usual  course  of  business  and 
to  the  probable  interest  of  the  corporation  can  be  made  by  no 
less  an  authority  than  that  of  the  directors. 

In  a  recent  case  it  is  a  qucere  whether  the  president  of  a 
bank  has  power  to  bind  the  bank  by  his  agreement  with  an 
accommodation  acceptor  of  a  draft  discounted  by  the  bank 
that  the  bank  will  not  look  to  him  for  payment  of  the  draft 
(other  security  having  been  furnished  to  the  bank  by  the 
drawer).  It  was  not  necessary  to  determine  this  point, 
because  the  arrangement  between  the  president  and  the 
acceptor  was  merely  verbal,  and  the  court  held  it  void  under 
the  Statute  of  Frauds.^^ 

18  Fulton  Bank  v.  New  York  &  Sharon  Canal  Co.,  4  Paige,  127. 
I''  Foster  V.  Essex  Bank,  17  Mass.  479. 
i«  Davis  V.  Randall,  115  Mass.  547. 
298 


JOINT   AUTHORITY.  §  144 

Statutory  or  Charter  Authority  of  President.  —  (Z)  In  New 
York,  special  statutes  have  allowed  many  matters  to  be  con- 
ducted in  the  president's  name.  Thus  the  bank  may  sue  and 
be  sued  in  the  name  of  its  president,  provided  the  cause  of 
action  is  distinctly  laid  to  be  for  or  against  the  corporation, 
and  not  for  or  against  him.^^  Mortgages  to  secure  sub- 
scriptions for  stock  property  run  to  him.  And  it  has  been 
accordingly  held  that  the  assignment  of  such  mortgages 
should  be  executed  by  him,  personally,  in  his  own  name,  with 
the  addition  of  his  official  designation,  and  under  his  private 
seal,  rather  tlian  under  the  corporate  seal.^*'  A  transfer  made 
to  "  L).  L.,  President  of  the  American  Exchange  Bank,"  was 
construed  to  be,  by  fair  interpretation,  a  transfer  directly  to 
the  bank, 21  with  the  same  effect  of  vesting  title  as  if  it  had 
been  made  to  the  bank  itself  by  its  corporate  name.  In  sup- 
port of  this  case  the  statutes  of  the  State  were  referred  to. 
But  the  reference  seems  needless,  for  the  decision  could  well 
have  rested  solely  upon  the  general  principles  enunciated. 
These  perhaps  afford  some  support  to  the  doctrine  advanced 
in  the  preceding  paragraph  (A;),  and  certainly  made  the  cited 
case  useful  as  a  general  precedent,  without  regard  to  the  effect 
of  local  legislation. 

(m)  A  charter  provision,  or  a  directorial  vote  conferring  a 
power  upon  the  "  president  and  directors,"  or  the  "  president 
and  cashier,"  will  be  strictly  construed  as  conferring  only  a 
joint  power,  exclusively,  and  by  no  means  a  joint  and  several 
power.  The  execution  can  be  by  neither  of  the  designated 
parties  singly,  but  must  always  be  strictly  by  both  in  con- 
junction.22  Though,  if  both  agree  that  a  certain  course  shall 
be  pursued,  and  that  an  executive  act  occurring  therein  shall 
be  done  by   one  alone,  that  act   may  be  legally  performed 

^9  Delafield  v.  Kinney,  24  Wend.  345  ;  Ogdensburgh  Bank  v.  Van 
Rensselaer,  G  Hill,  240;  Pentz  v.  Sackett,  Hill  &  D.  113.  See  also  Hunt 
i;.  Van  Alstyne,  25  Wend,  605. 

20  Valk  V.  Crandall,  1  Sandf.  Ch.  179. 

21  Leavitt  v.  Fisher,  4  Duer,  1. 

22  Ridgway  t-.  Farmers'  Bank,  12  Serg.  &  R.  256;  Macbean  v.  Irvine, 
4  Bibb.  17. 

299 


§  145  THE  PRESIDENT. 

according  to  sucli  arrangement.  This  is  mere  matter  of 
detail,  and  pertains  to  the  execution,  not  to  the  exercise,  of 
the  power.  For  examjjlc,  where  their  power  is  to  borrow 
money,  if  they  agree  upon  all  the  items  going  to  make  up  the 
transaction,  but  that  the  note  given  for  the  loan  shall  be  in- 
dorsed by  the  cashier  alone,  this  will  be  a  perfectly  regular 
and  sufficient  execution  of  the  duty  intrusted  to  them.^ 

Authority  given  by  the  directors  to  the  president  to  sell 
and  convey  certain  real  estate  includes  an  authority  to  enter 
into  a  valid  written  contract  for  such  sale  and  conveyance  to 
be  made  at  a  certain  day  future.-* 

§  145.  Representations  and  Admissions  of  the  President.  — 
Admissions  of  the  president  affect  the  bank  only  when  they 
relate  to  matters  within  the  scope  of  his  agency.^  The  fact  of 
his  high  and  responsible  position  does  not  operate  to  extend 
in  any  degree  the  rigidity  of  this  rule  of  the  common  law. 

(a)  Representations  of  a  president,  made  in  transacting 
the  bank's  business,  are  admissible  against  it ;  but  statements 
in  which  the  bank  has  no  interest  are  not.  Like  other  agents, 
the  president  must  act  within  the  scope  of  his  authority  to 
bind  his  principal,  unless  his  acts  are  ratified.^ 

(J)  The  president  has  no  inherent  authority  to  make  ad- 
missions that  will  release  the  maker  of  a  note  from  his 
liability  on  it.^ 

(c)  The  president.  P.,  acknowledged  a  debt  due  from  the 
bank  to  C,  which  was  guaranteed  by  the  E.  firm,  of  which  P. 
By  usage,  a  was  a  member.  Not  as  inherent  in  his  office,  but 
hav^e'poweTto  l»y  the  custom  of  the  bank,  P.  had  power  to  make 
take  debt  out  ^^^qI^  admissious,  and  his  interest  as  guarantor  did 

of  Statute  of  '  '^ 

Limitations,  not  dcstroy  its  effect,  since  his  act  did  not  affect 
his  liability  as  guarantor ;  he  was  lial)le  after  as  truly  as  be- 
fore the  admission.    After  so  remarking,  the  court  proceeded  : 

28  Fleckner  r.  Rank  of  United  States,  8  Wheat.  334. 
24  Augusta  Bank  v.  Hamblet,  35  Me.  491. 

1  §  145.  Spalding  v.  Bank  of  Susquehanna  County,  9  Barr,  28.  See 
remarks  on  Declarations  and  Admissions  of  Cashiers,  post. 

2  Kennedy  v.  Otoe  County  National  Bank,  7  Neb.  59. 

"  Hodges,  Executor,  v.  First  National  Bank  of  Richmond,  22  Gratt.  51. 

300 


ADMISSIONS. 


"Can  the  admission  of  an  unquestionable  fact,  which  did  not 
in  any  way  affect  his  liability,  or  promote  his  own  interest,  or 
wrong  his  principal,  be  held  to  place  him  in  a  position  antago- 
nistic to  his  principal?'*  Such  admission  may  be  made  away 
from  the  bank. 

{d)  The  president  of  a  bank  cannot  by  his  admissions 
charge  it  with  a  debt.'* 

(e)  A.,  a  business  man  accustomed  to  financial  transac- 
tions, inquired  of  a  bank  president  whether  the  bank  paid 
interest  on  deposits.  The  president  replied  that  it  Represent^. 
did  not,  but  that  he  would  give  him  a  certificate  fecting'the" 
that  would.  He  thereupon  gave  A.,  for  his  money,  ^'^"'^• 
an  interest-bearing  certificate  of  deposit  with  a  banking  firm 
of  which  the  president  was  a  member.  A.  noticed  that  the 
certificate  was  not  that  of  the  bank,  and  the  president  replied 
that  it  was  all  the  same  thing ;  that  the  firm  owned  the  bank, 
and  that  A.  could  get  his  money  at  the  bank  at  any  time. 
The  firm,  in  fact,  owned  1,500  of  2,500  shares  of  the  bank 
stock.  The  firm  became  insolvent ;  and  it  was  held  that  A. 
had  no  claim  on  the  bank.  The  president  did  not  mislead 
A. ;  he  knew  the  certificate  was  not  that  of  the  bank,  and  all 
the  president  told  him  was  that  the  certificate  was  as  good 
as  the  bank's,  which  was  a  matter  of  opinion,  and  would 
hardly  base  an  action,  unless  the  president  knew  the  firm  was 
in  a  dangerous  condition,  or  otherwise  was  guilty  of  inten- 
tional fraud,  and  then  the  suit  would  be,  not  against  the  bank, 
but  the  president.  The  court  distinguished  the  case  from 
Steckel  v.  First  National  Bunk  of  AUentown.  In  that  case, 
the  bank  officers  positively  asserted  that  the  certificates  were 
those  of  the  bank.^ 

§  146.  Knowledge  of  President.  —  (rt)  A  bank  president 
knew  the  address  of  an  indorser  who  should  have  been  notified 

*  Morgan  v.  Merchants'  National  Bank  of  Memphis,  13  Lea,  234 
(Tenn.,  1884).     See  Morawetz,  §  251. 

5  Henry  v.  Northern  Bank  of  Alabama,  63  Ala.  527  (1879). 

6  First  National  Bank  of  AUentown  v.  Williams,  100  Pa.  St.  123 
(1882),  distinguishing  Steckel  v.  First  National  Bank  of  AUentown,  93 
Pa.  St.  376. 

301 


§  147  THE   PRESIDENT. 

„      ,  ,        of  the  dishonor  of  a  note;  but  as  the  president  was 

Knowledge  '  ' 

of  iiidorser's  abscnt,  and  the  cashier  did  not  know  the  address, 
the  bank  failed  to  give  the  proper  notice.  Tlic  court 
lic'ld  the  accidental  absence  of  the  president  no  excuse  for 
the  bank's  failure  to  act  on  the  knowledge  possessed  by  him. 
An  oflficer  should  provide  for  such  contingencies ;  and  between 
the  bank,  the  negligence  of  whose  president  prevented  proper 
action,  and  the  indorser,  entirely  without  fault  and  not  receiv- 
ing the  notice  the  law  entitles  him  to,  the  loss  clearly  rests 
with  the  bank.i 

Notice  of  (^)    Notice   of   an    action   against   the   bank   is 

suit.  ^gjj  served  on  the  president,  though  away  from 

the  bank  .2 

(c)  In  an  action  by  an  assignee  in  bankruptcy  to  recover  of 
a  bank  a  payment  made  to  it,  as  in  violation  of  U.  S.  Rev.  Sts. 
§  5128,  the  bank  is  chargeable  with  knowledge  of  all  facts  in 
regard  to  the  debtor's  intention  and  solvency  which  its  presi- 
dent had  acquired  while  acting  as  president  in  its  behalf.^ 

§  147.  Liability  of  President  to  Bank  for  Breach  of  his  Trust, 
(a)  A  president  of  a  bank,  who,  knowing  a  customer  to  be 
Passing  witliout  mcaus,  induces  him  to  open  an  account 
to  I'rre'sm.n^i-^  at  a  bank,  and  to  overdraw  that  account,  and  who 
bie  person.  ]jy  j^jg  orders  to  thc  cashier  establishes  the  custom 
of  paying  such  overdrafts,  may  be  held  liable  to  the  bank  for 
the  amount  of  the  overdrafts. ^ 

The  president,  P.,  who  directed  the  cashier  to  pay  the  bank's 
money  to  N.,  an  irresponsible  person  (in  whose  business  P. 
was  interested),  without  security,  and  charge  it  to  N.  on  the 
bank  books,  is  personally  responsible  to  the  bank  for  the  money 
thus  paid  under  his  direction  in  violation  of  his  trust.'^ 

(S)  As  between  the  corporation  and  himself,  a  president  of 
a  bank  ordinarily  has  no  authority  to  sell  the  property  of  the 

1  §  146.    Central  National  Bank  v.  Levin,  0  Mo.  App.  543  (1879). 

2  Village  of  Port  Jervis  v.  First  National  Bank  of  Port  Jervis,  96 
N.  Y.  550. 

8  Getman  v.  Second  National  Bank  of  Oswego,  23  Hun,  498. 
1  §  147.    Oakland  Bank  of  Savings  v.  Wilcox,  GO  Cal.  127  (1882).. 
a  First  National  Bank  of  Sturges  v.  Reed,  36  Mich.  263. 
302 


LIABILITY.  §  149 

corporation  of  which  he  is  such  officer.  Before  he  j^^nj^^p^^p. 
can  Ic'-allv  do  so,  he  must  have  authority  by  the  erty  without 
charter,  the  direction  of  the  board  of  directors  or 
managing  committee,  or  by  usage.  And  where  the  property 
of  a  bank  is  soUl  by  a  president  without  authority,  and  the 
bank  suffers  loss  thereby,  he  may  be  held  to  respond  in  dam- 
ages to  the  extent  of  such  loss.^ 

(e)  The  Statute  of  Limitations  does  not  run  to  shield  a 
president  from  suit  by  the  bank  to  recover  for  dam-   statute  of 
age  by  his  fraud,  until  the  fraud  is  discovered  by   Li"'i''i'io"«- 
the  bank.'* 

§    148.    Liability  of  One  held  out  as  President.  —  P.    allowed 

himself  to  be  held  out  as  president  of  a  bank  not  legally 
organized.  C.  deposited  money,  which  was  lost  by  the  cash- 
ier's mismanagement.  C.  sued  P.,  as  inducing  his  loss  by 
giving  an  appearance  of  integrity  to  an  unworthy  institution. 
The  court  held  the  president  chargeable  with  constructive 
notice  of  the  management  by  the  subordinate  officers.  The 
directors  invite  the  public  to  deal  with  the  bank,  and  the  pub- 
lic has  a  right  to  expect  reasonable  care  and  oversight  on 
their  part;  and  the  law  will  presume  that  P.  knew  of  the 
cashier's  action,  as  it  was  his  duty  to  know.^ 

§  149.  Personal  Undertakings  for  the  Corporate  Benefit.  — 
If  the  notes  of  the  cori)oration  ane  protested  for  noni)aymcnt, 
and  are  thereafter  paid  by  the  president  individually  from  his 
own  private  funds,  for  the  honor  of  the  bank,  the  whole  trans- 
action having  been  conducted  throughout  in  strict  good  faith, 
the  president  becomes  thereby  a  creditor  of  the  bank  for  the 
amount  so  paid  by  him,  and  may  prove  the  claim  against  the 
bank  in  insolvency.^  But  if  the  president  guarantees  or  in- 
dorses the  promissory  notes  of  the  bank,  he  will  be  presumed 
to  do  it  gratuitously,  and  from  the  disinterested  motive  of  pro- 
moting the  welfare  of  the  institution  over  which  he  presides. 

3  First  National  Bank  of  Central  City  v.  Lucas,  21  Neb.  281  (1887). 
*  Atlantic  National  Bank  i'.  Harris,  118  Mass.  147. 
1  §  148.    Hauser  r.  Tate,  85  N.  C.  81  (1881). 

1  §  149.  Bank  Commissioners  v.  St.  Lawrence  Bank,  8  Barb.  436; 
3  Seld.  135. 

303 


§  150  THE   PRESIDENT. 

He  will  not  be  allowed  to  maintain  any  claim  by  reason  of  his 
so  doing,  except  upon  proof  of  an  exi)licit  contract  entered 
into  by  himself  with  the  government  of  the  corporation.^ 

§  150.  Payment  of  the  President.  —  With  regard  to  whether 
or  not  a  president  is  entitled  to  payment  for  his  services,  no 
absolute  and  unvarying  rule  can  be  laid  down.  No  implied 
promise  to  pay  him,  any  more  than  to  pay  any  other  director, 
is  raised  by  his  appointment  to  the  office.  On  the  contrary, 
it  has  been  said  that  the  presumption  is  that  he  is  not  to  be 
paid.  Even  for  such  a  service  as  superintending  the  repairs 
upon  the  bank's  real  estate,  it  has  been  held  in  Massachusetts 
that  the  president  cannot  recover  payment.^ 

But  frequently  a  bank  requires  so  much  of  the  time  of  its 
president  to  be  devoted  to  its  interests  and  affairs  that  it  in 
a  great  measure  precludes  or  materially  interferes  with  his 
prosecution  of  other  and  private  business.  In  such  cases  it  is 
customary  to  pay  him  a  salary,  as  a  cashier  or  any  other  offi- 
cer who  devotes  his  time  to  the  service  of  the  bank  is  paid. 
Ordinarily  the  matter  of  his  compensation,  in  such  cases,  is 
left  to  be  arranged  by  the  board  of  directors,^  and  whatever 
they  vote  to  pay  him  he  has  an  unquestionable  title  to  recover. 
But  if  they  take  no  definite  action  in  the  premises,  his  right 
to  demand  pay  will  depend  upon  the  nature  of  the  services 
rendered  by  him,  and  upon  all  the  circumstances  attendant 
upon  his  acceptance  and  incumbency.  If  these  suffice  to  show 
that  he  had  a  right  to  expect  that  he  was  to  be  paid,  and  that 
the  bank  or  board  of  directors  ought  to  have  so  understood, 
and  ought  to  have  expected  to  pay  him,  then  he  may  recover 
what  would  have  been  a  fair  salary  for  the  position.  The 
presumption  that  payment  is  to  be  made  arises  where  the 
work  or  employment  is  usually  the  subject  of  pay.  But  it 
does  not  attach  simply  because  the  work  is  valuable,  and 
therefore  might  properly  be  given  in  exchange  for  money. 
The  custom  or  usage  to  pay  for  such  work  must  be  existent, 
and  established  like  any  other  custom  or  usage,  so  that  it 

2  Leavitt  v.  Beers,  Hill  &  D.  221. 

1  §  150.    Pew  V.  First  National  Bank  of  Gloucester,  130  Mass.  391. 

2  Holland  t'.  Lewiston  Falls  Bank,  52  Me.  56i. 

304 


PAY    OF   THE    PRESIDENT.  §  150 

cannot  but  be  presumed  tluit  the  parties  respectively  conferred 
and  accepted  the  ofiicc  and  functions  of  president  in  view  of 
this  custom  and  usage,  and  with  the  expectation  of  conform- 
ing to  it.  But  informal  statements,  or  remarks  made  by  the 
president  to  various  individuals,  members  of  the  board  of 
directors,  to  the  effect  that  he  shall  expect  or  require  pay, 
have  no  bearing  upon  his  rights  whatsoever ;  especially  where 
no  definite  reply  appears  to  have  been  elicited.^  If  the  bank 
charter  distinctly  provides  that  the  president  shall  have  no 
pay  unless  it  be  voted  to  him  by  the  directors,  any  service 
which  he  may  perform  for  the  bank  will  be  presumed  to  be 
done  by  him  as  president,  and  will  give  him  no  extraordinary 
right  to  pay,  unless  from  its  nature,  or  from  evidence  adduced, 
it  is  shown  beyond  a  reasonable  doubt  that  the  act  was  really 
rendered  outside  of  the  duties  appurtenant  to  the  official 
position.* 

8  Sawyer  v.  Pawners'  Bank,  6  Allen,  207;  Olney  v.  Chadsey,  7  R.  I. 
224;  Hargroves  v.  Chambers,  '60  Ga.  580. 
*  Olney  v.  Chadsey,  supra. 

VOL.  I.  20  305 


CHAPTER  XI. 

THE   CASHIER. 

§  151.   Analysis. 

§  152.  The  cashier  is  the  bank's  executive,  the  performer.     Tie  has  charge 

of  tlie  routine  of  the  bank's  business,  but  is  not  clothed  with  dis- 
cretion in  weighty  matters  amounting  to  management. 

§  153.  Inherent  Powers.    §§  114,  14.3. 

§  154.  To  draw  checks  on  the  bank's  funds. 

(a)  Form  of  signature  that  will  bind  the  bank. 

(b)  Parol  admitted  when  on  the  face  of  the  instrument  there  is 

doubt. 

(c)  The  bank's  liability  depends  not  on  form,  but  on  the  facts, 

the  authority,  and  the  intent  of  the  parties.    §§  89, 94, 95  a, 
97,  98. 
§  155.  To  CERTIFY  Checks.    See  §  155/;  §  413. 

(a)  Not  those  given  as  collateral. 
(6)  Nor  his  own  checks.     See  (j). 
(c)  Form  of  certification. 
((/)  President  and  teller  may  perhaps  certify. 
(fj)  Restrictions  on  the  power  of  certification. 
(A)  Wrongful  certification  good  as  to  innocent  party. 
§  156.  To  BUY  AND  SELL  BiLLS  OF  EXCHANGE,  and  to  arrange  for  exchange. 

Quaere  as  to  his  power  to  accept  bills  for  the  bank. 
§  157.  To  CONTROL  THE  Bank's  PERSONALTY,  uulcss  withdrawn  from  his 

charge  by  the  directors  (§  159),  and  to  dispose  of  it  in  regu- 
lar course  of  business. 
"§  158.  To  INDORSE  the  bank's  negotiable  paper  for  collection,  discount  (see 

§  165  d),  payment  of  bank's  debts  (?).  (A,. 7),  or  to  make  over 
securities  held  for  a  debt  when  the  same  is  paid.     §  159^. 
But  he  cannot,  by  virtue  of  his  office,  indorse  for  accommodation, 
nor  indorse  the  bank's  name  on  his  own  paper  (§  169),  nor 
transfer  non-negotiable  paper.     See  («),  §  158. 
Bona  Jide  holder  without  notice  is  secure.     §§  171,  565,  n.  1  <». 
See  [b),^  158. 
(a)  General  rule. 
{k)  Form  of  indorsement. 
(i)   Countersigning  bank  bills. 
§  159.  To  COLLECT  Debts  due  the  Bank. 

(a)  To  discharge  a  mortgage  as  an  incidental  power. 
(6)  To  indorse  notes  for  collection, 
(c)  Protest. 

306 


THE  CASHIER.  §  151 

{d)  Authorizing  suit  for  a  debt  is  an  inherent  power  of  cashier. 

§§  143,  1G9. 
(e)  May  compromise  a  claim  as  far  as  usage  gives  him  authority, 

but  has  no  inlierent  power.     §  119. 
(/)  No  inherent  power  to  take  anytliing  but  money.     §  247. 
§  100.  To  borrow  money  in  the  bank's  name  in  the  regular  course  of  busi- 

ness, and  to  give  security  or  pledge.     §§  48,  63,  116  a. 
(a)  Borrowing  on  time. 
§  161.  To  receive  deposits.     §  179. 

§  162.  To  attend  to  the  correspondence  of  tlie  bank. 

§  163.  To  attend  to  the  transfer  of  shares. 

§  104.  To  buy  government  bonds.     §§  59,  77,  104 ;  II.  §  35. 

Special  Authority'. 
§  165.  By  organic  law,  vote,  verbal  order  of  board,  usage  and  tacit  ap- 

proval (c),  or  by  necessity  ((/).     §§  97,  116a. 
(a)  Exercise  of  discretion. 

(6)  The  law  presumes  regularity ;  and  in  favor  of  third  parties 
the  casliier  is  presumed  to  be  acting  within  his  authority 
if  the  nature  of  the  act  is  such  that  he  might  be  authorized 
to  perform  it. 
§  166.  Notice  to  Cashier.     §  9,  n.  9,  §§  104,  133,  146. 

§167.   Declarations  and  AmiissiONS.    §  42  c.  2,  §§  103, 124, 145, 167, 168, 203. 
(a)  and  (h)  Questions  as  to  genuineness  of  paper, 
(c)  Past  transactions. 

{d)  Representation  as  to  payment  of  note  held  to  bind  the  bank,  and 
(e)       this  even  if  the  cashier  had  an  adverse  interest  unknown  to  C. 

See,  on  this  principle,  §§  99,  109,  125,  136,  167  e. 
if)  Representations  aside  from  duties  as  cashier  do  not  bind. 
§  168.   Limitations  of  Time  and  Place. 

(a)  Test.     Can  the  business  be  as  well  done  away  from  the  bank  as  at 

the  bank.     §§  45,  46. 
(6)  Checks  may  be  drawn  elsewhere, 
(c)  Indorsement  elsewhere  held  good,  also  notice  received  away  from 

bank. 
{d)  Must  not  pay  or  certify  checks,  nor  in  general  give  information 

away  from  the  bank.     §  412.     But  see  (h). 
(e)  But  hona  Jide  holder  is  not  affected  by  the  cashier  having  acted  in 

an  improper  place. 
(/)  Deposits  nmst  be  received  at  bank. 
(g)  Bank  may  adopt  an  act  wrongfully  done  away  from  it. 
§  169.   No  Power  inherent. 

To  pledge  the  bank's  property  for  antecedent  debt. 
Nor  make  an  agreement  to  indemnify  a  sheriff. 
Nor  sue  on  bank's  notes.     §  159  d. 
Nor  release  a  surety. 

Nor  to  indorse  the  bank's  name  on  his  own  paper. 
Nor  to  buy  or  sell  realty  for  the  bank,  &c.     See  above,  mider  In- 
herent Powers. 
Nor  to  allow  over-draft.     §  357. 

307 


§  152  THE   CASHIER. 

§  170.   On  Instrcments  in  form  to  or  from  the  cashier,  the  bank  may  sue  or 
be  sued  if  tlic  contract  is  really  a  corporate  one,  though  the  title 
"  casiiier"  is  omitted.     §§  05,  144  e. 
§  171.    When  tuk  Cashiek  binds  the  Bank.     §§  89,  94,  95,  97,  98. 
General  rule. 

Intra  vires  and  ultra  vires  acts  ( /). 
((/)  Inlierent  powers  and  buna  Jide  third  parties.     See  also  (e),  (/). 
(g)   Holding  out  by  failure  to  object. 
(/()  Payment  of  forged  paper  binds  the  bank. 
(()   Implications  from  cashier's  acts. 
§  172.   Liability  of  Cashier  to  the  Bank.     §§  79,  128,  129,  717  c;  II.  §§  53, 
153. 

(a)  Not  responsible  for  his  subordinates  if  he  properly  superintends 

them ;  and  he  is  not  obliged  to  examine  every  entry  made  by 
them,  but  only  to  exercise  such  care  as  a  man  of  ordinary  pru- 
dence does  in  his  own  business  of  a  similar  nature. 

(b)  Directors'  order  will  not  excuse  an  act  that  the  oflBcer  ouglit  to 

know  is  wrongful. 
§  173.  Cashier  as  Trustee, 
His  duty, 
(a)  Property  bought  with  funds  stolen  from  the  bank  not  subject  to  a 

resulting  trust. 
(6)  But  equity  will  compel  cashier  to  account. 
§  174.   The  Cashiek's  Subordinates. 

Teller's  power  not  exclusive  of  the  cashier,  but  the  justice  of  this 
ruling  has  been  questioned.  .  . 

(a)  The  teller. 
§  175.  A  temporary  substitute's  authority. 

§  176.         Cashier  after  expiration  of  charter. 
§  176  a.     Cashier  estopped  to  deny  his  authority. 
§  180.    When  same  Officer  acts  for  two  Institutions. 

§  152.  The  Cashier  is  the  chief  Executive  OfEcer,  through 
whom  the  whole  liuaiicial  operations  of  the  bank  are  con- 
ducted.^ In  the  discussion  of  the  powers  and  duties  of 
cashiers  we  enter  upon  a  very  difficult  topic.  In  no  other 
branch  of  banking  law  are  the  usages  of  business  so  fre- 
quently at  variance  with  the  rules  of  law,  so  powerful  in 
warping  and  altering  those  rules,  so  diverse  among  them- 
selves in  different  places  and  different  institutions,  and  at 

1  §  152.  Merchants'  Bank  v.  State  Bank,  10  Wall.  650.  Its  money 
transactions  of  every  description,  though  they  may  not  be  determined  by 
his  discretion,  will  yet  be  conducted  by  and  through  him.  Baldwin  v. 
Bank  of  Newbury,  1  Wall.  234;  United  States  v.  City  Bank  of  Columbus, 
21  How.  356. 
308 


THE   OFFICE   IS   EXECUTIVE.  §  lo2 

different  times.  In  no  other  branch  of  banking  law  is  it  so 
difiicult  to  reconcile  the  decisions  and  opinions  uttered  from 
numerous  independent  judicial  tribunals,  or  to  educe  from 
them  generalizations,  principles,  and  rules  in  any  satisfactory 
shape. 

The  key-note  to  the  whole  subject  lies  in  this:  that  the 
office  of  the  cashier  is  strictly  executive.  He  is  the  business 
officer  of  the  bank,  but  in  the  sense  of  one  who  transacts  the 
business,  not  of  one  who  regulates  and  controls  it.  The 
grand  difhculty  which  has  been  experienced  in  defining  his 
exact  functions  has  always  lain  in  the  necessity  of  giving  him 
sufficient  practical  power  to  enable  him  to  conduct  the  daily 
routine  of  business  without  trespassing  upon  the  domain  of 
discretionary  authority  which  pertains  exclusively,  and  for  the 
most  part  inalienably,  to  the  directors.  Acts  tvhich  demand 
only  confidence  in  the  intefjrity  of  the  official,  and  familiarity 
with  the  forms  and  customs  of  business^  acts  strictly  of  per- 
formance., ivhich  do  not  rise  to  the  importance  of  the  semi-judi- 
cial character^  are  those  which  he  is  properly  delegated  to  do. 
But  the  responsible  conduct  and  management  of  the  affairs  of 
the  institution,  upon  the  soundness  and  wisdom  of  which  its 
prosperity  and  success  depend,  which  call  for  the  exercise  of 
a  high  degree  of  care,  knowledge,  and  experience,  and  a  semi- 
judicial  discretion,  which  demand  general  business  qualifica- 
tions of  a  high  order,  are  not,  and  never  have  been  held  to  be, 
appurtenant  to  the  office  of  cashier.  He  is  properly  the  ex- 
ecutive agent  of  the  directors.  It  is  his  duty  to  carry  out 
what  they  devise.  They  are  responsible  for  the  soundness  of 
the  action  resolved  upon  ;  he  is  responsible  for  the  honesty, 
accuracy,  regularity,  and  skill  with  wdiich  that  action  is  car- 
ried out.  They  are  the  mind  and  he  is  the  hands  of  the 
corporation.  They  may  decide  to  make  a  certain  loan  or  dis- 
count, to  sell  or  mortgage  corporate  property.  He  will  pay 
over  the  money,  take  the  borrower's  promissory  note,  and  see 
that  it  is  in  proper  form ;  he  may,  by  direction  of  the  board, 
affix  the  corporate  signature  and  seal,  and  make  delivery,  on 
behalf  of  the  corporation,  of  all  instruments  necessary  to  com- 
plete the  conveyance  or  the  mortgage.     It  is  not  wholly  unapt 

309 


§  154  THE   CASHIER. 

to  liken  the  board  of  directors  to  a  bench  of  judges,  and  the 
cashier  to  the  clerk  of  court. 

§  153.  Inherent  Powers  of  Cashier.^  —  There  arc  certain 
functions  which  by  hjug  and  universal  usage  have  come  to 
be  recognized  as  belonging  to  the  office  of  cashier,  and  have 
been  judicially  ascertained  and  declared  to  be  inherent  in  the 
cashier  as  matter  of  law,  and  without  any  vote  of  the  directors 
or  provision  of  the  organic  law.  Such  power  may  of  course 
be  enlarged  or  restricted  by  the  charter,  the  bank,  or  the 
board ;  but  in  the  absence  of  such  special  action  these  "  inhe- 
rent "  powers  that  are  connoted  by  the  title  "  cashier  "  belong 
to  him  by  virtue  of  his  appointment  to  such  office. 

§  154.  Power  to  draw  Checks.  —  The  cashicr  has  power  to 
draw  checks  or  drafts  upon  the  funds  of  the  bank  deposited 
elsewhere.  Indeed,  he  is  ordinarily  the  only  officer  of  the 
institution  who  can  legally  do  this.     It  is  proper  for  him  to 

designate  himself  as  "  Cashier  of  the Bank,"  in  order  to 

show  that  he  is  acting  officially,  and  that  the  check  is  intended 
to  withdraw  corporate  funds.  But  if  he  fails  to  make  this 
fact  clear  by  these  or  any  other  words  in  the  instrument, 
yet,  if  the  drawee  bank  pays  the  check  from  corporate  funds, 
it  will  be  protected  and  the  payment  will  be  valid,  if,  as  a 
matter  of  fact,  the  cashier  was  acting  officially,  and  did  in- 
tend to  draw  against  the  balance  standing  to  the  credit  of 
his  corporation.  To  prove  this,  parol  evidence  is  admissible, 
and  by  such  evidence  the  paying  bank  may  even  be  allowed 
to  explain  away  the  fact  that  the  check  has  been  credited 

^  §  153.  The  question  whether  any  particular  act  does  or  does  not 
fall  within  the  general  power  of  a  cashier  has  been  said  to  be  a  question 
of  law  for  the  court,  and  not  of  fact  for  the  jury.  Farmers  &  Mechanics' 
Bank  v.  Troy  City  Bank,  1  Dougl.  457;  Peninsular  Bank  i\  Hanmer,  14 
Mich.  208;  Merchants'  Bank  v.  State  Bank,  10  Wall.  GOi.  The  services 
of  a  jury  may  indeed  be  called  in  when  it  is  claimed  that  acts  or  conduct 
of  the  board  have  amounted  to  a  public  holding  out,  or  that  a  banking 
usage  relative  to  the  subject  of  dispute  exists.  Merchants'  Bank  v.  State 
Bank,  10  Wall.  604.  But  after  the  jury  has  found  upon  these  matters, 
it  still  remains  for  the  court  to  declare  whether  or  not  the  usage  is  one 
which  accords  with  and  will  be  sanctioned  by  law ;  and  whether  the  hold- 
ing out  was  within  the  possible  legal  .scope  of  a  cashier's  authority. 
310 


cashier's  signature  to  check.  §  154 

upon  its  books  to  the  cashier's  private  account,  and  to  rebut 
the  inference  against  itself  which  must  at  first  arise  from  this 
state  of  the  accounts.^ 

(a)  In  Mechanics'  Bank  v.  Bank  of   Columbia,  the  facts 
were  briefly  these.     William  Paton,  Jr.,  cashier  of  Form  of 
the  Mechanics'  Bank  of  Alexandria,  drew  a  check   nature"!^  ^'^ 
in  form  as  follows  :  — 


No.  18.  Mechanics'  Bank  of  Alexandria, 

June  25,  1817. 

Cashier  of  the  Bank  of  Columbia, 

Pay  to  the  order  of  P.  H.  Minor,  Esq.,  Ten  Thousand  Dollars. 
§10,000.  WM.  PATON,  JUN. 


Minor  was  the  teller  of  the  Mechanics'  Bank.  The  check 
was  one  of  the  printed  blanks  from  the  official  check-book  of 
the  bank.  Other  checks  had  been  customarily  drawn  by  the 
cashier  on  behalf  of  the  bank,  in  the  like  form  in  all  respects, 
save  that  he  usually  added  "  Cas."  or  "  Ca."  to  his  name. 
Much  testimony  was  introduced  with  the  object  of  showing 
that  in  drawing  this  check  he  was  actino;  officiallv. 

Test.    Was 

and  intended  to  draw  it  on  belialf  of   the  bank,   the  act  offi- 
Mr.  Justice  Johnson  delivered  the  opinion  of  the 
court,  substantially  as  follows  :  — 

"  The  merits  of  this  case  lie  within  a  very  limited  compass. 
The  question  is,  whether  a  certain  act,  done  by  the  cashier  of 
a  bank,  was  done  in  his  official  or  individual  capacity.  Had 
the  draft  signed  by  Paton  borne  no  marks  of  an  official  charac- 
ter on  the  face  of  it,  the  case  would  have  presented  more  diffi- 
culty. But  if  marks  of  an  official  character  not  only  exist  on 
the  face,  but  predominate,  the  case  is  really  a  very  familiar  one. 
Evidence  to  fix  its  true  character  becomes  indispensable.  .  .  . 

1  §  151.  Mechanics'  Bank  v.  Bank  of  Columbia,  5  Wheat.  326:  United 
States  V.  City  Bank  of  Columbus,  21  How.  356;  Merchants'  Bank  v. 
Central  Bank,  1  Kelly,  418. 

311 


§  154  THE   CASHIER. 

"Upon  comparing  the  exceptions  [taken]  with  the  evi- 
dence, it  does  not  appear  that  they  affirm  any  other  proposi- 
tion growing  ont  of  that  evidence,  but  that  the  check  on  the 
face  of  it  puri)orted  to  be  the  private  check  of  Paton ;  and  no 
extrinsic  evidence  could  be  received  to  prove  the  contrary. 

"  The  ground  on  which  it  can  be  contended  that  this  check 
was  a  i)rivatc  check  is,  that  it  had  not  below  the  name  the 
letters  '  Cas.'  or  '  Ca.'  But  the  fallacy  of  the  proposition  will 
at  once  apj)ear  from  the  consideration  that  the  consequence 
would  be  that  all  Paton's  checks  must  have  been  adjudged 
private.  For  no  definite  meaning  could  have  been  attached 
to  the  addition  of  those  letters  without  the  aid  of  parol 
testimony. 

(J)  "  But  the  fact  that  this  appeared  on  its  face  to  be  a  pri- 
vate check  is  by  no  means  to  be  conceded.  On  the  contrary, 
the  appearance  of  the  corporate  name  of  the  institution  on  the 
face  of  the  paper  at  once  leads  to  the  belief  that  it  is  a  cor- 
porate, and  not  an  individual  transaction  ;  to  which  must  be 
added  the  circumstances,  that  the  cashier  is  the  drawer  and 
the  teller  the  payee,  and  the  form  of  ordinary  checks  deviated 
from  by  the  substitution  of  '  to  order '  for  '  to  bearer.'  The 
evidence,  therefore,  on  the  face  of  the  bill,  predominates  in 
favor  of  its  being  a  bank  transaction.  Applying  then  the 
plaintiff's  own  principle  to  the  case,  and  the  restriction  as  to 
the  production  of  parol  or  extrinsic  evidence  could 
niluetrwiR'n  havc  bccu  Only  applicable  to  himself.  But  it  is 
ofthrSru-  enough  for  the  purposes  of  the  defendant  to  estab- 
nient  there      jj  j^  ^|-,j^^   ^^^^^G  cxistcd  ou  the  facc  of  the   paper 

IS  doubt.  • 

circumstances  from  which  it  might  reasonably  be 
inferred  that  it  was  either  one  or  the  other.  In  that  case,  it 
became  indispensable  to  resort  to  extrinsic  evidence  to  re- 
move the  doubt.  The  evidence  resorted  to  for  this  purpose 
was  the  most  obvious  and  reasonable  possible,  viz. :  that  this 
was  the  appropriate  form  of  an  official  check ;  that  it  was,  in 
fact,  cut  out  of  the  official  check-book  of  the  bank,  and  noted 
on  the  margin  ;  that  the  money  was  drawn  in  behalf  of,  and 
applied  to  the  use  of,  the  Mechanics'  Bank,  and  by  all  the 
banks  and  all  the  officers  of  the  banks  through  which  it 
312 


FORM  OF  SIGNATURE.  §  lo4 

passed  was  recognized  as  an  official  transaction.  It  is  true  it 
was  in  evidence  that  tliis  check  was  credited  to  Paton's  own 
account  on  the  books  oi  liis  bank.  But  it  was  done  by  his 
own  order,  and  with  tlie  evidence  before  their  eyes  that  it  was 
officially  drawn.  This  would  never  have  been  sanctioned  by 
the  directors  unless  for  reasons  which  they  best  understood, 
and  on  account  of  debits  which  they  only  could  explain. 

(^)  "  It  is  by  no  means  true,  as  was  contended  in  argument, 
that  the  acts  of  agents  derive  their  validity  from  professing 
on  the  face  of  them  to  have  been  done  in  the  exercise  of  their 
agency.  In  the  more  solemn  exercise  of  derivative  powers, 
as  applied  to  the  execution  of  instruments  known  to  the  com- 
mon law,  rules  of  form  have  been  prescribed.     But   in  penerai, 

.»,,./.  1     tlie  liability 

in  the  diversified  exercise  of  the  duties  ot  a  general  of  bank  de- 
agent  the  liability  of  the  principal  depends  upon  FonSbut"" 
the  facts;   that  the  act  was  done  in  the  exercise  i"J'Jj';|^,;or- 
and    within   the   limits   of    the    power   delegated,  j/j  of  agent; 

'  _  "  2d,  intent  of 

These  facts  are  necessarily  inquirable  into  by  a  the  parties. 
court  and  jury;  and  this  inquiry  is  not  confined  to  written 
instruments  (to  which  alone  the  principle  contended  for  could 
apply),  but  to  any  act  with  or  without  writing  within  the 
scope  of  the  power  or  confidence  reposed  in  the  agent ;  as,  for 
instance,  in  the  case  of  money  credited  in  the  books  of  a 
teller,  or  proved  to  have  been  deposited  with  him,  though  he 
omits  to  credit  it." 

The  law  concerning  the  manner  in  which  a  cashier  may 
sign  checks  intended  to  be  officially  drawn  against  deposits  or 
funds  standing  in  other  banks  to  the  credit  of  his  own  bank, 
is  contained  in  the  foregoing  opinion,  almost  as  in  a  nutshell. 
Any  form  of  check  whatsoever,  and  any  form  of  signature, 
provided  the  instrument  bears  anywhere  upon  its  face  any 
indication  of  a  corporate  character,  will  suffice  to  open  the 
door  for  the  introduction  of  testimony  to  prove  that  in  fact  the 
character  was  corporate.  And  even  though  there  be  noth- 
ing on  the  face  of  the  check  to  indicate  its  character,  it  might 
still  be  the  corporate  check,  under  the  general  principle  that, 
if  any  agent  has  authority  to  make  a  written  contract  (not 
under  seal),  and  makes  it  in  his  own  name,  whether  he  de- 

313 


§  154  THE  CASHIER. 

scribes  himself  as  agent  or  not,  (and  even  whether  his  principal 
be  known  or  not,  which  in  the  case  under  consideration  would 
not  ha})i)en,)  both  the  agent  and  his  principal  can  hold  the 
third  party,  C,  and  C.  can  hold  them,  unless  from  attendant 
circumstances  it  is  clearly  manifest  that  an  exclusive  credit 
was  given  to  the  agent,  and  it  was  intended  by  both  parties 
that  no  resort  should  be  had  by  or  against  the  principal  in  any 
event.2  If  by  usage  or  otherwise  the  cashier  has  authority 
from  tlie  bank  to  check  against  its  funds  in  his  own  name, 
and  he  docs  so,  the  bank  is  ultimately  liable  on  the  facts, 
whether  it  is  on  the  face  of  the  check  or  not,  and  therefore 
the  law  holds  it  immediately  liaVjlc. 

If  it  can  be  collected  from  the  whole  instrument  that  it  is 
the  intent  to  bind  the  bank,  it  will  be  held,  no  matter  how 
informal  the  expression,  and,  if  unintelligible  or  uncertain, 
parol  evidence  is  admissible  to  show  wdiat  party  is  bound.-^ 
In  the  case  just  cited,  a  note  signed  by  the  president,  directors, 
and  secretary  was  held  a  corporate  note ;  and  in  New  York, 
where  S.  B.  S.  sent  the  plaintiff  a  Ijill  of  exchange  payable  to 
the  order  of  S.  B.  S.,  Cash.,  and  indorsed  the  same  and  en- 
closed it  in  a  letter  dated  at  bank  and  signed  by  S.  B.  S., 
Cash.,  the  indorsement  was  held  that  of  the  bank.^ 

It  cannot  be  doubted  that  proof  that  the  check  was  drawn 
and  signed  in  the  manner  in  which  the  cashier  was  uniformly 
wont  to  draw  and  sign  when  he  intended  to  draw  on  behalf  of 
his  bank,  and  which  the  drawee  bank  was  wont  to  pay,  with- 
out objection  from  the  cashier's  bank,  out  of  its  corporate 
credit,  would  always  be  regarded  as  prima  facie  and  by  most 
juries  as  conclusive  evidence  of  the  corporate  character,  and 
would,  wherever  the  interests  of  justice  required  it,  be  held 
to  estop  the  cashier's  bank  from  denying  this  character. 
Whence  it  follows,  that  a  check  in  any  form  customarily  used 
by  the  cashier  in  drawing  checks  on  behalf  of  his  bank  would 
be  sustained  at  law  as  the  check  of  the  bank,  however  little 
in  accordance  with  old-fashioned  rules  might  be  the  agent's 
method  of  signing  on  behalf  of  his  principal.     Difficulty  could 

2  Story's  Agency,  §  160  a.  «  Haile  r.  Peirce,  32  Md.  327. 

*  Bank  of  Genesee  v.  Patchin  Bank,  19  N.  Y.  312. 
314 


CERTIFICATION.  §  155 

only  arise  where  the  cashier  had  a  private  account  at  the 
same  bank. 

§  155.  Power  to  certify  Checks  inherent.  —  By  the  universal 
usage  of  banks  the  certification  of  chocks  has  become  a  part 
of  the  ordinary  daily  routine  of  banking  business  and  is 
therefore  inherent  in  the  cashier's  office,  being  a  matter  of 
execution  requiring  no  great  discretion.     (See/.) 

(a)  But  in  case  the  check  is  not  drawn  in  the  usual  course 
of  business,  as  if  it  is  given  as  collateral  security,  check  Riven 
the  cashier  has  no  inherent  authority  to  certify,  «« collateral. 
and  if  the  fact  appears  on  the  face  of  the  check,  as  where 
it  contained  the  words  "  To  hold  as  coUat.  for,  &c.,"  the 
holder  is  put  to  his  inquiry  concerning  the  special  power  that 
would  be  necessary  to  enable  the  cashier  to  certify.^  Of 
course  the  cashier  has  no  right  to  certify,  if  the  drawer  has 
not  sufficient  funds  in  the  bank,  nor  to  certify  his  own  checks. 
(Seey.) 

{b}  The  certification  is  usually  made  by  writing  "  Good  " 
across  the  face  of  the  check,  followed  by  the  initials  of  the 
officer;  but  it  may  perhaps  be  done  verbally .^  —  though  it  is 
much  to  be  regretted  that  any  such  decision  should  have  been 
made.     For  the  effect  of  certification,  see  §  403. 

We  have  here  to  deal  with  the  powers  and  duties  of  the 
various  bank  officers  concerning  this  transaction,  developing 
the  above  points  and  considering  the  important  cases  bearing 
thereon.  So  soon  as  a  check  has  been  certified,  the  amount 
should  at  once  be  debited  to  the  drawer  and  credited  to  the 
payee,  or,  as  is  sometimes  preferred,  to  a  "certified  check 
account,"  upon  the  books  of  the  bank.  The  payee  thereafter 
occupies  in  several  respects,  as,  for  example,  the  running  of 
the  Statute  of  Limitations,  the  position  of  an  ordinary  deposi- 
tor. Though  of  course  he  cannot  insist  upon  the  right  to  con- 
tinue a  deposit  account  if  the  bank  does  not  wish  to  open  it ; 
neither  can  he  draw  checks  against  his  credit,  which  is  prop- 
erly only  to  be  paid  over  upon  presentment  and  surrender  of 
the  accepted  check.     He  is  an  ordinary  contract  creditor  for 

^  §  155.    Dor.<5ey  v.  Abrahams,  5  Rep.  53  (Penn.). 
2  Espy  I'.  Bank  of  Cincinnati,  18  Wall.  60i  (U.  S.). 

315 


§  155  THE   CASHIER. 

tlie  amount.  The  duty  to  make  this  entry  is  what  might  be 
described  as  a  purely  internal  duty.  It  is  a  part  of  the  mech- 
anism of  the  institution  itself.  The  neglect  of  the  officials 
to  do  it  may  render  them  personally  liable  to  the  bank  for  any 
consequent  loss,  but  does  not  affect  the  rights  of  any  outside 
party.  For  the  substance  of  the  doctrines  thus  far  laid  down 
we  have  the  direct  authority  of  the  Girard  J3ank  v.  Bank  of 
Penn  Township,^  a  case  in  which  the  object  of  the  court 
seemed  to  be  to  refrain  so  far  as  possible  from  saying  anything 
useful.  Also  we  have  the  indirect  authority  of  all  the  New 
York  cases,  which  tacitly  assume  the  inherent  legality  of  cer- 
tification as  the  necessary  basis  of  all  their  decisions  (^post). 

((?)  The  most  common  form  in  which  to  express  the  certifi- 
cation is  by  simply  writing  upon  the  check  the  word  "good," 
followed  by  the  initials  of  the  certifying  officer.  But 
it  is  not  essential  that  this  form  should  be  observed. 
Any  other  writing,  as  the  name  or  initials  of  the  officer,  or 
the  word  "  good  "  alone,  if  intended  and  understood  to  bear 
this  meaning,  will  be  construed  accordingly.  In  England  the 
"  marked  checks,"  which  in  some  respects,  though  not  in  all, 
resembled  our  certified  checks,  were  customarily,  until  the 
statute  interfered,  literally  only  marked,  and  bore  no  written 
word  whatsoever.  It  makes  no  difference  how  meaningless 
in  itself  may  be  the  method  resorted  to,  or  even  that,  like 
the  word  "  good,"  it  might  seem  easily  capable  of  a  different 
meaning ;  it  will  be  construed  in  reference  to  the  customs  and 
usages  of  the  business,  and  to  the  understanding  of  the  par- 
ties, and  will  be  held  valid  or  invalid  solely  in  reference  to 
this  construction.  It  is  a  certification  if  it  be  done  animo  cer- 
tijieandi,  if  we  may  be  allowed  to  coin  the  phrase.  See  (6) 
above,  and  Checks  and  Certification. 

(c?)  Rarely  the  president  undertakes  to  certify  checks;  quite 
frequently  the  teller ;  but  perhaps  by  far  the  most  frequently 
Who  may  tlio  cashicr.'*  By  reason  of  this  proportion  it  has 
certify.  always  been  assumed  that,  if  the  power  be  inherent 

in  any  office,  it  is  inherent  in  that  of  the  cashier.     But  here 
lias  been  a  grand  question  and  doubt  in  this  whole  subject. 
8  39  Penn.  St.  92.  *  Barnes  v.  Ontario  Bank,  19  N.  Y.  152. 

816 


POWER   TO    CERTIFY.  §  155 

Is  it,  or  is  it  not,  an  implied  power  of  the  cashier,  —  a  power 
which  is  to  bo  assumed  as  constituting  by  custom  one  of  the 
essential  elements  of  liis  office  and  position,  which  it  is  to  be 
taken  for  granted  that  he  can  exorcise  simply  by  virtue  of  the 
fact  of  his  being  cashier  ?  Or,  from  another  point  of  view, 
Will  his  certification  of  a  check  bind  the  bank  in  favor  of  an 
innocent  holder  who  had  no  actual  notice  that  the  bank  had 
never  clothed  him  with  any  such  authority,  nor  intended  that 
he  should  exercise  it  ? 

(e)  The  well-known  case  of  Musscy  v.  The  Eagle  Bank  ^  is 
the  strongest  authority  against  the  inherent  power.  That  case, 
it  is  true,  passes  directly  only  upon  the  power  of  the  Mussey  v. 
teller,  but  the  line  of  argument  is  general  enough  ^^^^  ^*°^' 
to  include  also  the  cashier  or  the  president.  An  effort  was 
made  to  prove  a  usage  for  the  teller  to  certify.  But  the  evi- 
dence was  declared  wholly  incompetent  to  sustain  the  usage, 
and  the  court  went  on  to  say  that  the  usage,  even  if  proved, 
would  not  have  sustained  the  theory  that  the  power  was  "  in- 
herent." For  it  would  be  a  usage  to  allow  the  teller  to 
pledge  the  bank's  credit,  a  power  which  by  the  constitution  of 
the  bank  can  be  exercised  only  by  the  corporate  government, 
or  under  their  special  delegation,  and  consequently  cannot 
be  an  implied  or  resulting  function  of  any  individual  officer. 
Certainly  it  is  sound  to  say  that  a  power  exercised  by  virtue 
of  a  usage  is  strictly  a  power  exercised  by  virtue  of  a  dele- 
gation of  authority,  which  the  law,  by  reason  of  the  usage, 
conclusively  presumes  to  have  been  made.  Therefore  the 
recognition  of  the  fact  that  the  corporate  government  could 
delegate  this  power  carries  with  it  a  recognition  also  of  the 
further  fact,  that  the  usage  (which  conclusively  implies  such 
delegation  as  matter  of  imperative  law),  if  proved,  would  be 
good.  Yet  the  tendency  of  the  court  in  this  case  appeared  so 
strongly  opposed  to  any  possible  validity  of  the  usage,  that  it 
has  been  often  cited  and  commented  upon  as  if  it  went  to  this 
length.  In  point  of  fact,  it  is  an  unavoidable  logical  sequence 
from  the  language  used,  that  the  usage,  if  shown,  would  be 
valid,  though  perhaps  this  result  of  his  own  words  was  not 

6  9  Met.  306. 

317 


§  155  THE   CASHIER. 

recognized  even  by  the  learned  judge.  A  little  fault  also  can 
be  found  with  the  phraseology  in  this  opinion.  Certification 
is  said  to  be  a  pledf/inr/  of  the  credit  of  the  hank.  This  has 
a  formidable  sound,  as  though  an  act  so  important  should  be 
done  by  or  under  the  immediate  supervision  of  those  officials 
who  have  the  supreme  discretionary  control  of  the  corporate 
business.  But  the  phrase  is  deceptive.  It  is  obvious  that,  in 
point  of  fact,  if  the  transfer  of  credit  from  the  drawer  to  the 
payee  or  to  "  certified  check  account "  is  duly  made,  contem- 
poraneously with  the  certification,  there  is  no  possibility  of 
any  loss  accruing  to  the  bank.  As  well  might  it  be  said  that, 
if  A.  draws  his  check  in  favor  of  B.,  both  being  depositors  in 
the  same  bank,  and  B.  deposits  it,  the  shifting  of  the  credit 
from  the  one  to  the  other  is  a  pledge  of  the  credit  of  the  bank. 
Practically,  instead  of  being  called  a  pledge  of  credit,  it  should 
be  considered  a  transfer  of  credit,  and  should  be  regarded  as 
a  mere  matter  of  book-keeping.  It  is  true  that  the  bank  is 
bound  by  the  acceptance,  as  by  a  promise  to  pay  ;  but  it  is 
only  a  promise  to  pay  a  sum  actually  left  with  it  for  the  ex- 
press purpose  of  being  used  for  such  payment,  and  already  due 
and  owing.  It  is  under  a  similar  obligation  to  every  depositor 
in  the  bank,  though  the  ordinary  depositor  has  no  more  accu- 
rate written  evidence  of  the  amount  to  his  credit  than  is  fur- 
nished by  his  bank-book.  Before  the  acceptance  the  debt  ran 
to  A.,  the  drawer  ;  after  the  acceptance  to  B.,  the  holder. 
There  seems  nothing  very  objectionable  in  allowing  the  cash- 
ier to  make  this  change.  These  words,  therefore,  if  they 
can  be  regarded  as  describing  a  business  operation  involving 
risk  and  calling  for  discretion,  are  in  fact  seriously  deceitful. 
In  many  banks,  where  cashiers  are  not  permitted  to  certify, 
they  are  accustomed,  upon  request,  to  give  their  "  cashier's 
check,"  of  which  the  practical  effect  is  not  to  be  distinguished 
from  the  result  of  certification,  and  which  there  can  be  no 
question  of  their  power  to  do.  The  real  objection  to  the  prac- 
tice of  certification  lies  in  the  dread  of  its  being  abused  by 
careless  certification  when  there  are  no  funds,  or  an  equally 
careless  subsequent  paying  out  of  funds  on  checks  of  the 
drawer,  so  as  to  reduce  his  deposit  below  the  amount  called 
318 


POWER   TO    CERTIFY   INHERENT.  J  lOO 

for  by  the  ccrtilied  check.  Theoretically,  certification  is 
harmless  ;  it  is  neglect  to  abide  by  the  theory  that  has  brought 
it  into  unmerited  disrepute. 

Even  if  this  case^  could  be  construed,  which  we  have 
tried  to  show  that  it  cannot,  to  sui)i)ort  the  view  that  usage 
could  not  confer  upon  an  officer  the  power  to  bind  the  bank 
by  certification,  yet  in  this  it  would  stand  alone  against  a 
great  weight  of  contrary  authority.  The  Pennsylvania  case, 
cited  above,'^  shows  that  in  that  State  the  power  may  be  con- 
ferred, and  will  be  upheld.  And  though  the  reticence  of  the 
judges  is  such  that  they  do  not  intimate  how  it  should  be  con- 
ferred, or  under  what  circumstances  it  will  be  upheld,  yet  if  it 
can  be  thus  treated  by  any  means,  even  by  the  most  formal 
vote,  it  can  also  be  sustained  by  inference  resting  upon  proof 
of  established  usage.  The  New  York  cases  are  numerous, 
and  united  in  sustaining  the  authority  derived  from  usage.^ 
It  would  seem  to  be  a  universal  custom  in  that  State  for 
either  the  cashier  or  the  teller  to  certify  checks.  Nothing  be- 
ing easier  than  to  prove  this  custom,  it  was  usually  done  at 
the  trial  of  all  the  causes. 

(/)  But  a  recent  case  declares  directly  that  the  power  of  cer- 
tification is  inherent  in  the  office  of  cashier,  and  criticises  the 
Massachusetts  decision  quite  sharply,  as  being  based 

'  .  New  \  ork 

upon  an  idea  that  the  power  of  certihcatiou  was   declares  the 
the  creature  of  usage  or  custom.     The  decision  is   cerThl^cation 
said  to  be  twenty  years  old,  to  have  been  never  reit-  "he'officVof 
erated  in  Massachusetts,  to  have  been  repudiated  in   u^'s^'c  ? 
New  York  and  other  States,  and  not  now  properly 
to  be  regarded  as  law,  even  in  Massachusetts,  so  as  to  override 
"  a  general  rule  of  construction,  based  upon  the  principles 
of   the   common  law  of  universal  application."^     Previously 

«  Mussey  v.  Eagle  Bank,  9  Met.  306. 

'  Girard  Bank  v.  Bank  of  Penn  Township,  39  Penn.  St.  92. 

8  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
12>;  Meads  v.  Merchants'  Bank,  25  id.  143;  Clarke  National  Bank  v. 
Bank  of  Albion,  52  Barb.  592;  Willets  v.  Phoenix  Bank,  2  Duer,  121; 
and  the  New  York  cases  cited  in  the  remainder  of  this  chapter. 

9  Cooke  V.  State  National  Bank  of  Boston,  52  N.  Y.  96,  affirming  same 
case  in  50  Barb.  339,  1  Lans.  491. 

819 


§  155  THE   CASHIER. 

the  New  York  cases  had  not  strictly  been  precedents  upon 
the  point  of  the  inherent  character  of  the  power ;  though  the 
Massachusetts  case  had  ah-eady  been  severely  criticised,  and 
a  plain  willingness  shown  to  override  it  upon  necessary 
occasion. ^^ 

The  most  important  case  which  has  ever  arisen  concerning 
the  ])ower  of  the  cashier  to  certify  is  that  of  the  Merchants' 
])ank  V.  State  Bank,^^  which  was  first  tried  in  the  United  States 
Circuit  Court  for  the  first  circuit,  before  Clifford  and  Lowell, 
JJ.  The  decision  in  the  lower  court  was  against  the  validity 
of  the  certified  checks.  The  case  was  carried  to  the  Supreme 
Court  of  the  United  States,  and  this  decision  was  reversed. 
It  was  there  held  that  the  power  of  the  cashier  to  do  such  an 
act  might  be  properly  inferred  by  the  jury  from  the  facts  of 
his  doing  such  cognate  acts  as  drawing  checks  against  the 
bank,  borrowing  and  lending  money,  and  the  like.  But  sub- 
stantially the  court  upheld  the  power  as  inherent  in  the  ofiice. 
It  is  the  duty  of  the  cashier,  say  the  court,  "  to  receive  all  the 
funds  which  come  into  the  bank,  and  to  enter  them  upon  its 
books.  The  authority  to  receive  implies  and  carries  with  it 
authority  to  give  certificates  of  de})osit  and  other  proper 
vouchers.  Where  the  money  is  in  the  bank,  he  has  the  same 
authority  to  certify  a  check  to  be  good,  charge  the  amount  to 
the  drawer,  appropriate  it  to  the  payment  of  the  check,  and 
make  the  proper  entry  on  the  books  of  the  bank.  This  he  is 
authorized  to  do  virtute  officii.  The  power  is  inherent  in  the 
ofiice."  It  should  be  remembered  that  the  court  is  here  deal- 
ing with  the  cashier  of  a  bank  organized  under  the  act  of 
Congress  creating  the  national  banking  system  of  the  United 
States,  which  act  expressly  allowed  the  bank  to  make  such  a 
purchase  of  coin  as  that  for  which  this  cashier  had  given 
these  certified  checks.  The  by-laws  of  the  bank  were  also 
referred  to,  which  made  the  cashier  responsible  "  for  the 
moneys,  funds,  and  all  other  valuables  of  the  bank "  ;  and 
declared  that  "  all  contracts,  checks,  drafts,  receipts,  &c.  shall 

1°  In  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16 
N.  Y.  125. 

"  10  Wall.  604. 
320 


CERTIFICATION.  §  155 

be  signed  either  by  the  cashier  or  president."  But  no  especial 
knowledge  of  these  by-laws  was  asserted  or  shown  on  behali' 
of  the  plaintiff,  nor  can  it  be  said  that  they  confer  upon 
the  cashier  any  more  extensive  or  different  authority  than 
that  naturally  and  customarily  enjoyed  and  exercised  by  any 
cashier  according  to  the  ordinary  and  well-known  usage  and 
general  manner  of  conducting  the  bunking  business. 

The  bank  may  expressly  delegate  the  power  of  certifying  to 
its  president,  its  cashier,  or  its  teller.  But  it  would  seem 
that  the  fact  that  such  power  is  so  specially  delegated  to 
any  other  officer  than  the  cashier  would  not  necessarily 
be  exclusive  of  such  power  as  inhering  in  the  cashier  also, 
at  least  in  the  absence  of  actual  notice  to  any  party  to  be 
affected.^2 

Judge  Seldcn  regards  the  teller  as  the  more  proper  officer, 
on  the  ground  that  of  course  the  cashier  could  certify,  but 
that  the  teller's  office  is  an  offshoot  of  the  cashier's,  and  has 
appropriated  that  peculiar  description  of  duties,  which  ren- 
ders it  more  convenient  for  the  teller  to  assume  this  function 
also.^^ 

((/)  A  bank  which  allow^s  an  officer  to  certify  checks  can 
of  course  impose  upon  his  authority  any  restrictions  it  may 
choose.     As  usual,  these  restrictions  will  always  be   Restrictions 

on  certitica- 

valid  as  between  the  officer  and  the  bank.  But  it  tion. 
it  should  be  decided  that  the  power  of  certification  is  inherent 
in  any  special  officer,  or  if  local  usage  should  be  such  that  he 
is  to  be  regarded  as  held  out  to  the  world  as  possessing  the 
general  power  of  certification  subject  to  no  unusual  limita- 
tions, notice  of  the  existence  of  such  restrictions  must  be 
brought  home  to  the  knowledge  of  any  third  persons  Avho  are 
to  be  affected  by  them.^^  Notice  that  a  bank  has  refused  to  be- 
come party  to  an  agreement  entered  into  between  other  banks 
in  the  same  city,  for  settling  clearing-house  balances  by  certified 

12  Merchants'  Bank  ?;..  State  Bank,  10  Wall.  604,  at  p.  650. 

"  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16 
N.  Y.  125;  Irving  Bank  v.  Wetherald,  36  N.  Y.  335. 

1*  Clarke  National  Bank  v.  Bank  of  Albion,  52  Barb.  502 ;  IMerchants' 
Bank  v.  State  Bank,  10  Wall.  604. 

VOL.  I.  21  321 


§  155  THE   CASHIER. 

checks,  is  not  notice  that  the  same  bank  does  not  permit  its 
cashier  to  certify  checks  in  the  ordinary  manner  in  the  daily 
course  of  business.     The  two  tilings  are  not  cciuivalcnt.i^ 

(A)  One  limitation,  however,  the  law  lays  down  in  all  cases. 
Wror.-ful  A  cashier  cannot  certify  the  check  of  a  drawer  who 
ccrtiikatioii.  jjj^g  jjQ^  unincumbered  funds  in  the  bank  sufficient 
to  meet  the  check.  Any  person  having  notice  of  the  fact  that 
the  bank  had  not  enough  of  the  drawer's  funds  on  hand  to 
meet  the  check  at  the  time  of  certification,  will  be  presumed 
to  know  that  the  act  was  unauthorized  and  void,  and  will  not 
be  allowed  to  hold  the  bank  liable  upon  \U^  But  any  outside 
party  is  justified  in  accepting  the  representation  of  the  officer 
as  to  the  sufficiency  of  the  drawer's  credit,  or  in  assuming 
without  special  inquiry  that  all  is  right  solely  on  the  strength 
of  the  undertaking  itself.  Knowledge  that  the  agent  cannot 
certify  without  funds,  is  not  knowledge  that  there  are  no 
funds.  This  is  an  extrinsic  matter.  A  certification  accepted 
on  the  faith  of  the  cashier's  or  teller's  statement  that  ho  was 
authorized  to  certify,  would  not  bind  the  bank  if  he  was  not 
so  authorized.  But  his  statement,  directly  or  by  implication, 
that  there  are  the  requisite  funds  in  the  bank  is  of  a  different 
nature,  and  will  bind  the  bank. 

(i)  In  general  terms,  it  may  be  said  that,  where  one  deal- 
ing with  an  agent  ascertains  that  the  agent's  act  corresponds 
Representa-  cxactly  witli  thc  tcrms  of  the  power,  he  may  take 
tions.  |-}^(3  agent's  representation  as  to  any  extrinsic  fact, 

peculiarly  within  the  agent's  knowledge,  and  not  ascertaina- 
ble by  a  comparison  of  the  power  with  the  act  done  under 
it.i7  "  The  certificate  of  the  cashier  of  a  bank  that  a  check 
is  '  good,'  is  a  representation  of  a  present  existing  fact, 
within  his  knowledge  as  cashier;  and  if  that  certificate  l)e 
made  by  him  in  the  course  of  his  ordinary  business  as  cash- 
ier, it  will  bind  the  bank  in  favor  of  innocent  third  persons, 
upon  the  principle  of  estoppel  in  pais,  even  if  the  certificate 

16  Cooke  V.  State  National  Bank  of  Boston,  52  N.  Y.  96. 
"  Ibid.,  affirming  same  case  in  50  Barb.  339,  1  Lans.  494. 
"  Farmers  &  Mechanics'  Bank,  &c.  v.  Butchers  &  Drovers'  Bank,  16 
N.  Y.  125. 
322 


CERTIFICATION.  §  155 

be  not  true,  and  the  drawer  of  the  clicck  lias  no  funds  on 
deposit  in  the  bank."  ^^ 

Whetlier  banks  are  competent,  by  usage  or  express  agree- 
ment, to  extend  their  liability  so  as  to  include  cases  where 
the  certification  is  known  to  be  made  without  sufficient  funds 
of  the  drawer,  is  a  quccre  in  Cooke  v.  State  National  Bank ;  ^'-^ 
though  it  is  said  that  Selden,  J.  has  expressed  an  opinion  in 
the  negative.^*' 

(y)  An  ofhcer,  though  authorized  to  certify  generally,  yet 
cannot  legally  certify  his  own  checks.  Apparently  the  rule 
covers  equally  cases  where  he  has  and  where  he  om.er can- 
has  not  money  to  the  designated  amount  standing  Ill's  own'^^ 
to  his  credit  in  the  bank.  The  principles  laid  checks. 
down  in  §§  99,  125,  seem  sufficiently  to  sustain  this  position. 
But  if  his  certification  is  false,  we  have  the  authority  of  a 
thoroughly  considered  case  for  saying  that  it  is  utterly  void 
as  against  the  bank.  The  cause  of  Claflin  v.  The  Farmers' 
and  Citizens'  Bank  turned  upon  the  validity  of  the  president's 
false  certification  of  his  own  check,  in  the  hands  of  a  bona 
fide  holder  for  value.  In  the  Supreme  Court  it  was  not 
denied  that  the  act  was  wrongful  and  unauthorized  as  be- 
tween the  bank  and  the  president.  But  it  was  said  that  the 
mere  identity  of  name  signed  upon  the  check  as  drawer  with 
the  president's  name  was  not  alone  sufficient  to  charge  the 
holder  with  notice  that  they  were  one  and  the  same  person ; 
and  there  being  no  other  proof  of  such  notice,  the  bank  was 
declared  liable.  But  in  the  Court  of  Appeals  this  ingenious 
evasion  of  the  wholesome  rule  was  rejected.  The  identity  of 
name  was  regarded  as  sufficient  to  put  every  one  to  whom  it 
came  upon  inquiry  as  to  whether  the  president  was  seeking  to 
use  his  official  character  for  his  private  benefit;  and,  indeed, 
it  may  be  suggested  that  there  was  not  alone  identity  in 
name,  but  the  similarity  of  handwriting  in  the  two  signatures 

^*  Morse  v.  Massachusetts  National  Bank,  1  Holmes,  20f),  per  Shepley,  J. 
And  to  the  same  purport  is  Pope  v.  Bank  of  Albion,  59  Barb.  22G. 

19  52  N.  Y.  00. 

-°  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16 
N.  Y.  125. 

323 


§  156  THE   CASHIER. 

ought  also  to  have  been  taken  into  consideration.  In  a  final 
and  very  satisfactory  decision,  the  bank  was  declared  not  to 
be  bound  by  the  acceptance.^* 

§150.  Dealings  in  Bills  of  Exchange  — A  cashier  has  in- 
herent power  to  buy  and  sell  bills  of  exchange,  and  to  make 
contracts  and  arrangements  to  secure  exchange,  and  provide 
for  the  acceptance  of  bills  drawn  by  the  bank.  He  cannot 
accept  for  the  bank  bills  drawn  against  it,  for  accommoda- 
tion, and  whether  he  can  accept  at  all  is  doubtful. 

The  business  of  dealing  in  bills  of  exchange  is  a  depart- 
ment of  the  general  business  of  banking.  It  may  or  not  be 
undertaken  by  the  corporation,  at  its  own  option.  If  it  is  un- 
dertaken, the  duty  of  buying  and  selling  the  bills  and  indors- 
ing them  over  to  the  purchaser  is  within  the  ordinary  scope  of 
the  cashier's  office.*  The  presumption  of  his  power  to  do  so 
must,  therefore,  be  imperative  in  favor  of  a  third  party  dealing 
with  him  without  notice  to  the  contrary.  But  whether  his 
general  charge  of  this  department  would  give  him  power  to 
bind  the  bank  by  his  acceptance  of  bills  of  exchange  drawn 
against  it,  is  a  matter  scarcely  to  be  regarded  as  beyond  a  ques- 
tion. The  cashier  of  the  Bank  of  Kentucky  was  declared,  in  a 
State  court,  not  to  have  this  power  by  virtue  of  his  office.^  In 
Michigan,  however,  in  ruling  that  a  cashier  could  not  accept 
bills  for  accommodation,  it  was  said  that  such  an  acceptance 
would  be  void  in  the  hands  of  a  holder  with  notice  of  its 
character.^  From  this  it  might  perhaps  be  inferred  that  the 
cashier  could  accept  on  behalf  of  the  bank  if  it  were  for  a  lona 
fide  purpose,  not  being  accommodation.  It  is  certain  that  the 
cashier  never  has  authority  to  bind  the  bank  by  any  of  the 
numerous  species  of  "accommodation"   contracts,  which,  in 

21  Claflin  V.  Farmers  &  Citizens'  Bank,  36  Barb.  540  (Supreme  Court), 
overruled  in  25  N.  Y.  293  (Court  of  Appeals). 

1  §  156.  Lafayette  Bank  v.  State  Bank,  4  McLean,  208;  Robb  v.  Ross 
County  Bank,  41  Barb.  586;  Marvine  v.  Hymer.s,  2  Kern.  223;  Wild  u. 
Bank  of  Passamaquoddy,  3  Mason,  505;  Fleckner  v.  Bank  of  United 
States,  8  Wheat.  360. 

2  Pendleton  v.  Bank  of  Kentucky,  1  T.  B.  :\Ionr.  179. 

8  Farmers  &  ^Mechanics'  Bank  v.  Troy  City  Bank,  1  Dougl.  457. 
324 


DEALING    WITH    BILLS   OF   EXCHANGE.  §  157 

one  shape  and  another,  are  so  common  in  business  circles/ 
though  an  innocent  holder  may  have  a  right  to  hold  the 
bank. 

Where  a  bill  of  exchange  is  indorsed  by  a  cashier,  though 
only  for  the  purpose  of  transmitting  it  for  collection,  he  be- 
comes a  "  party  "  to  it  in  the  sense  of  a  statute  which  makes 
a  notarial  certificate  of  notice  of  presentment  and  nonpayment 
to  "  parties  "  admissible  as  evidence  of  such  notice ;  the  cer- 
tificate is  evidence  of  notice  having  been  given  to  the  cashier, 
and  therefore  to  the  bank,  since  the  subject  matter  falls  within 
the  scope  of  his  agency.^ 

The  cashier  of  a  Kansas  City  Bank  orally  agreed  with  a 
firm  which  was  its  New  York  correspondent,  that,  if  the  firm 
would  accept  certain  drafts  to  the  amount  of  835,000  nego- 
tiated by  the  bank,  it  would  keep  on  deposit  with  the  firm 
until  their  maturity  a  balance  equal  to  their  amount,  and  the 
firm  have  a  lien  on  such  balance  as  security,  with  the  right  to 
charge  the  account  at  any  time  with  the  acceptances,  and 
appropriate  to  their  payment  so  much  of  the  deposit  as  neces- 
sary therefor  ;  the  firm  to  be  kept  informed  of  the  condition 
of  the  bank,  which  the  cashier  stated  to  be  embarrassed,  but, 
with  certain  expected  aid,  able  to  continue  business.  Held, 
that  this  agreement  was  not  invalid  as  against  public  policy, 
was  not  fraudulent  as  to  the  holders  of  drafts  drawn  on  the 
firm  after  it  was  made,  and  was  within  the  power  of  the  cashier 
to  make,  both  under  his  general  authority,  and  by  virtue  of  a 
by-law  which  gave  him  supervision  of  the  bank,  with  duty  to 
"  attend  to  the  making  of  loans,  discounts,  and  other  active 
business  transactions  of  the  bank." 

§  157.  Personalty.  —  The  cashier  has  full  charge  of  the 
bank's  personal  property,  except  so  far  as  withdrawn  from 
his  control  by  the  bank  or  by  the  directors. 

The  cashier  has  full  charge,  and  power  of  disposition  in 
the  regular  course  of  business,  of  all  personal  property  of 
the   bank,    whether    specie,    notes,    bills,   bonds,   securities, 

*  West  St.  Louis  Savings  Bank  v.  Shawnee  County  Bank,  95  U.  S. 
557. 

6  Bank  of  United  States  v.  Davis,  2  Hill,  451. 

325 


§  158  THE   CASHIER. 

valuable  papers,  or  of  whatsoever  other  description  of  per- 
sonal property  the  bank  may  have  in  its  possession.^ 

lie  has  the  superintendence  of  its  books  of  accounts.'^ 
Judge  Shepley  has  given  the  following  very  good  abstract  of 
the  ordinary  duties  of  a  cashier  :  "  To  keep  the  funds,  notes, 
bills,  and  other  choscs  in  action  of  the  bank,  to  be  used  from 
time  to  time  for  the  exigencies  of  the  bank ;  to  receive 
directly,  and  through  subordinate  officers,  all  moneys  and 
notes  of  the  bank ;  to  surrender  notes  and  securities  upon . 
payment ;  to  draw  checks ;  to  withdraw  funds  of  the  bank 
on  deposit ;  and  generally  to  transact,  as  the  executive  officer 
of  the  bauk,  the  ordinary  routine  of  business.  But  the  or- 
dinary duties  of  a  cashier  do  not  comprehend  the  making 
of  a  contract,  which  involves  the  payment  of  money,  with- 
out an  express  authority  from  the  directors,  unless  it  be 
such  as  relates  to  the  usual  customary  transactions  of  the 
bank."  3 

§  158.  Indorsement.  —  The  cashier  has  inherent  poAver  to  in- 
dorse and  transfer  ne(jotiahle  paper  on  behalf  of  the  bank,  for 
collection,  discount  (/),  payment  of  the  bank's  debts  (e,^), 
Weight  of  f^^'  ^^y  way  of  making  over  securities  held  by  the 
authority.  ]^^^^]-  q^  payment  of  the  loan  (§  159  </),  or  in  any 
other  case  arising  in  the  regular  course  of  business,  but  has 
no  inherent  authority  to  indorse  for  accommodation,  nor  to 
put  the  bank's  name  on  his  own  paper,  nor  to  give  title  to  any 
other  than  negotiable  property  of  the  bank. 

Any  indorsement  made  by  the  cashier  on  behalf  of  the 
Bonajide  ^^^k,  tliough  Wrongful,  will  bind  the  bank  in  favor 
holder.  Qf  a  bona  fide  holder  for  value  without  notice. 

Any  form  of  indorsement  will  be  good,  even  though  only  the 

name  of  the  cashier  without  his  title,  if  in  fact  the 

^°"°'  transaction  was  on  behalf  of  the  bank,  and  within 

1  §  157.  "Wild  V.  Bank  of  Passaraaquoddy,  3  Mason,  505;  Franklin 
Bank  v.  Steward,  '61  i\le.  519  ;  Morse  v.  Massachusetts  National  Bank, 
1  Holmes,  C.  C.  209. 

2  Sturges  V.  Bank  of  Circleville,  11  Ohio  St.  153;  Baldwin  v.  Bank  of 
Newbury,  1  Wall.  234. 

8  Morse  v.  Massachusetts  National  Bank,  1  Holmes,  C  C.  209. 

326 


POWER   TO   TRANSFER   BANK'S   PROPERTY.  §  158 

the  cashier's  authority.     See  §  154  b.     These  points  will  now 
be  illustrated  and  expanded. 

((f)  All  the  bank's  negotiable  paper  the  eashier  may  nego- 
tiate and  transfer  on  its  behalf/  and  to  this  end  may  indorse 
it  over,  so  as  to  bind  the  bank  like  any  ordinary  indorser 
on  similar  paper.  But  the  character  of  negotia-  May  trans- 
bility  is  a  strict  limitation  upon  his  inherent  power.  n^goUabie 
He  cannot,  solely  by  virtue  of  his  office,  pass  title  {^^['o't'her' 
to  non-negotiable  paper  of  any  sort,  or  to  any  property. 
other  description  of  corporate  property,  as,  for  example,  a 
judgment  given  in  favor  of  the  bank.  His  action  in  making- 
transfers  of  this  latter  description  can  be  sustained  only  by 
authority  directly  conferred  by  the  directors,  or  arising  from 
established  usage.^  Of  course  this  power  of  transfer,  like 
almost  every  power  which  an  agent  can  possess,  may  easily  be 
so  abused  by  him  as  to  render  him  liable  to  his  principal.  It 
is  very  difficult  to  say  precisely  how  much  discretion  can  be 
properly  exercised  by  the  cashier  in  trading  in  negotiable 
securities.  Clearly  he  has  no  right  to  push  it  to  that  point 
where  virtually  it  becomes  a  considerable  and  important 
branch  of  the  bank's  business,  and  is  nevertheless  conducted 
solely  by  himself.  It  was  never  contemplated,  either  by 
the  legislature  in  conferring  the  franchise  or  by  the  stock- 
holders in  investing  their  capital,  that  trading  in  negotia- 
ble securities,  if  carried  to  such  an  extent  as  to  become  an 
essential  and  vital  element  in  the  corporate  business  and 
prosperity,  should  be  conducted  solely  upon  the  single  discre- 
tion of  the  cashier.  The  management  of  the  important 
affairs  of  the  institution  was  intended  to  be  the  function  of  the 
directors. 

We  can  only  state  this  principle  in  general  terms.  It  would 
be  a  matter  of  infinite  difficulty  to  draw  the  boundary  line, 

1  §  158.  Wild  V.  Bank  of  Passaraaquoddy,  3  Mason,  505;  State  Bank 
V.  Wheeler,  21  Ind.  flO;  City  Bank  v.  Perkins,  29  N.  Y.  554;  Cooper  v. 
Curtis,  30  Me.  488;  Kimball  v.  Cleveland,  4  Mich.  606;  Crocket  v.  Young, 
1  Sm.  &  M.  241;  Everett  v.  United  States,  6  Port.  166;  Bridenbecker  v. 
Lowell,  32  Barb.  9. 

2  Barrick  v.  Austin,  21  Barb.  241;  Holt  v.  Bacon,  25  Miss.  567. 

327 


§  158  TUE   CASHIER. 

and  no  adjudicated  cases  assist  us  in  so  doing.  Certainly, 
in  a  well-ordered  bank  the  directors  would  not  allow  the 
cashier  to  usurp  their  powers  improperly  in  this  respect.  Nor 
could  he  do  so  without  their  knowledge. 

(/>)  It  may  also  happen  that  a  cashier  may  wilfully  make  a 
transfer  or  indorsement  in  direct  disobedience  to  sjiccial  direc- 
torial instructions.     But  in  any  of  these  cases  of 

Transfer  /•         i  •         i 

without  au-     improper  transfers  by  the  cashier,  he  simply  ren- 
'^"  ^'  ders  himself  responsible  to  the  bank  for  the  conse- 

quences of  his  misconduct.  The  outside  party  dealing  with 
him  in  good  faith,  and  without  notice  of  the  irregularity, 
holds  the  bank  as  if  the  transaction  had  been  unobjectionable 
throughout.  For  it  is  an  inherent  power  of  the  cashier,  which 
he  exercises  simply  by  virtue  of  his  office,  to  make  the  trans- 
fer, and  no  person  can  be  required,  in  a  case  where  no  cir- 
cumstances of  suspicion  put  him  upon  inquiry,  to  go  behind 
this  authority.  If  the  agent  exceeds  it,  the  matter  lies 
wholly  between  himself  and  his  principal.^ 

(c)   Since  the  cashier  has  the  general  power  to  indorse  over 

bills  and  notes  of  the  bank,  for  the  purpose  of  passing  title 

therein,  he  of  course  has  the  lesser  and   included 

Indorsement  -,  n  •    i  r  t 

for  (liscouiu,  power  to  indorse  for  special  purposes,  as  lor  dis- 
et  ion,  c.  ^Q^jj^^_  gy  j^igQ  £qp  collection,  and  for  transmis- 
sion for  collection,  he  may  indorse  both  paper  belonging  to 
the  bank  and  paper  intrusted  to  it  for  collection,  or  given  to 
it  as  collateral  security.*     If  paper  is  indorsed  by  him  for  this 

8  City  Bank  v.  Perkins,  29  N.  Y.  554.  In  this  case  the  cashier  had 
pledged  a  note,  which  it  was  urged  he  had  no  right  to  do.  The  suit  was 
brought  against  the  maker  by  a  bona  Jide  holder  for  value  and  without 
notice,  claiming  under  the  cashier's  indorsement.  The  court  did  not 
pass  upon  the  cashier's  authority,  holding  that,  whether  he  had  it  or  not, 
yet  the  plaintiff  had  a  sufficient  title  to  protect  the  maker  in  paying  to 
him,  and  could  oblige  him  to  do  so.  Gillett  v.  Phillips,  3  Kern.  114: 
transfer  by  cashier  of  notes  to  an  amount  in  excess  of  what  he  may  legally 
transfer  is  void,  except  as  to  bona  fide  holder  without  notice.  St.  Louis 
Perpetual  Ins.  Co.  v.  Cohen,  9  Mo.  416:  transfer  in  bad  faith  binds  in 
favor  of  bonafde  holder  for  value  and  without  notice. 

*  Elliot  V.  Abbot,  12  N.  H.  549;  Corser  v.  Paul,  41  id.  24;  Potter  v. 
Merchants'  Bank,  28  N.  Y.  641. 
328 


INDORSEMENT.  —  PARTIES   WITHOUT   NOTICE.  §  158 

special  and  limited  purpose,  and  is  subsequently  fraudulently 
converted,  yet  if  the  indorsement  be  general,  and  the  paper 
comes  to  the  hands  of  a  ho}ia  fide  holder  fur  value  and 
without  notice,  who  presumes  and  has  a  right  to  presume 
from  the  style  of  the  indorsement  that  it  was  made  in  the  ordi- 
nary course  of  business,  and  created  a  guaranty  on  the  part 
of  the  bank,  the  bank  may  be  held  to  respond  as  an  ordinary 
indorser.^  The  risk  is  voluntarily  incurred  by  tiie  bank  in 
putting  its  indorsement  in  such  a  form  that  it  docs  not  convey 
notice  of  its  true  character  when  an  attempt  is  made  to  use  it 
fraudulently.  It  has  been  specially  held  that  a  cashier  has 
power  to  indorse  over  negotiable  paper  in  payment  of  debts  of 
the  bank  ;  ^  also  as  preliminary  to  demand  and  notice,  and  to 
the  institution  of  a  suit  upon  it."  But  these  limited  powers 
are  of  course  included  in  the  general  authority,  which  is 
amply  supported  by  abundance  of  judicial  decisions,  and  which 
may  be  stated  in  the  broadest  terms : 

{cV)    That  the  cashier,  by  his  indorsement    of   negotiable 
paper  on  behalf  of  the  bank  will  always  bind  the  bank  to  the 
full  extent  that  any  individual  indorser  of  like  paper   General 
and'l-'  like  form  would  be  bound,  unless  the  holder   authority 
for  value  of  the  indorsed  paper  took  it  with  actual   ["eaoUabie 
notice  of  some  fact  rendering  the  indorsement  ir-   p^p^'"- 
regular  and  invalid.     Many  of  the  cases  cited  supra  in  this 
section  assert  that  the  consideration  for  the  transfer  need  not 
appear  upon  the  instrument,  but  will  be  presumed.     The  pre- 
sumption is  open  to  rebuttal  by  proof  that  no  consideration, 
or  only  an  inadequate  one,  passed.     But  rebutting  evidence  of 
this  description  can  be  used  only  against  the  original  trans- 
feree, or  against  a  subsequent  holder  with  notice. 

A  cashier  may,  in  the  regular  course  of  business,  assign  and 
indorse  notes  belonging  to  the  bank,  and  whether  negotiable 
paper  has  or  has  not  been  authorized  by  the  discount  com- 
mittee will  not  affect  hona  fide  indorsees  before  maturity.^ 

^  Robb  V.  Ross  County  Bank,  41  Barb.  586. 
8  Crocket  v.  Young,  1  Sm.  &  M.  241. 
''  Hartford  Bank  v.  Barry,  17  Mass.  94. 

8  Blair  v.  First  National  Bank  of  Mansfield,  2  Flippin,  111  (U.  S.,  1877). 

329 


§   158  THK    CASHIER. 

(t;)  A  cashier  cannot  assign  discounted  bills  and  notes  to  a 
Power  to  pay  tlc'positor  in  payment  of  his  deposit/-*  Assigning 
dqm.-it  with    iiiortji-ao-es,  or  disposing  of  tlie  bank's  property,  such 

nt'jfotiable  o    ra      ?  i  o 

bills  doubttd.  as  discounted  bills,  is  a  part  of  the  management, 
and  belongs  to  the  directors.^^ 

(/)  The  cashier  has  a  general  power  to  indorse,  and  if  he 
has  procured  a  bona  fide  rediscount,  it  will  be  good 
iiei'^^^.od.  as  within  his  implied  power,  but  he  cannot  bind 
See  §  14.  j^j^  bank  as  an  accommodation  indorser  of  his  own 
promissory  note :  such  a  transaction  bears  on  its  face  notice 
of  possible  want  of  powcr.^^ 

((/')  The  cashier  of  a  bank  is  usually  intrusted  with  all  the 
funds  of  the  bank  in  cash,  notes,  bills,  and  other  clioscs  in 
action,  to  be  used  from  time  to  time  for  the  ordi- 
power  to  dis-  nary  and  extraordinary  exigencies  of  the  bank.  He 
ban^iT's  obHga-  IS  accustomcd  to  receive  directly,  or  through  the 
negotiabiVpl  Subordinate  officers,  all  money  and  notes  of  the 
per  aiKnncd.  ^^^^^  .  ^^  deliver  up  all  discouutcd  notes,  and 
other  securities  and  property,  when  payment  of  the  dues  for 
which  they  are  given,  have  been  made  ;  and  to  draw  checks 
from  time  to  time  for  money,  wherever  the  bank  has  depos- 
its and  pecuniary  funds.  In  short,  he  is  considered  as  the 
executive  officer,  through  whom  and  by  whom  the  whole  mon- 
eyed transactions  of  the  bank  in  i)aying  or  receiving  debts, 
and  discharging  or  transferring  securities,  are  to  be  conducted. 
It  does  not  seem,  therefore,  too  much  to  infer,  in  the  absence 
of  all  known  and  positive  restrictions,  that  he  possesses  the 
incidental  authority,  and  indeed  that  it  is  his  duty,  to  apply 
the  negotiable  funds,  as  well  as  the  moneyed  capital  of  the 
bank,  to  discharge  its  debts  and  obligations.^'-^ 

Hence,  it  seems  to  be  a  natural  conclusion  that,  prima  facie, 
the  cashier  of  a  bank  possesses  the  incidental    authority  to 

9  Lamb  v.  Cecil,  25  W.  Va.  288  (1883);  28  id.  G59. 

10  Hoyt  V.  Thompson,  1  Seld.  320  (N.  Y.). 

"  West  St.  Louis  Savings  Bank  v.  Shawnee,  95  U.  S.  557. 

12  Fleckner  v.  Bank  of  United  States,  8  Wheat.  3G0,  361.  Cocheclio 
National  Bank  v.  Haskell,  51  N.  H.  116;  Merchants'  Bank  v.  State  Bank, 
10  Wall.  604. 

330 


INDORSEMENT.  §  158 

indorse  the  negotiable  securities  held  by  the  bank,  in  order  to 
supply  the  wants  and  to  promote  the  interests  of  the  bank, 
and  any  restriction  upon  such  authority  must  be  established 
by  competent  proofs,  and  will  not  be  presumed  to  cxist.^^ 

{h)  The  various  forms  of  indorsement  which  have  been  em- 
ployed by  cashiers  have  given  rise  to  important  questions 
concerning  their  respective  validity.  The  possible  i.„,.,„s  „£ 
divergence  seems  to  be  limited  substantially  to  "'^'^'•=^e'"ent. 
four  different  methods,  viz. :  " Bank,  by  A.  B.,  cash- 
ier "  ;  "  A.  B.,  cashier  of  the Bank  "  ;  "  A.  B.,  cash- 
ier "  ;  or,  finally,  simi)ly  the  name  of  "  A.  B."  without  any 
other  words  whatsoever.  These  are  the  four  cardinal  forms 
which  alone  call  for  consideration.     Others  are  only  slight 

modifications  of  these,  such  as  "  For  the Bank,  by  A. 

B.,  cashier,"  or  verbal  variations  by  the  use  of  sim))le  abbre- 
viations, as  "  Cash.,"  "  Cas.,"  or  Cr."  Such  will  be  easily 
recognized  as  substantially  identical  with  one  or  other  of 
these  four,  and  will  be  governed  by  the  same  rules  respect- 
ively. 

It  is  obvious  at  once  that  the  first  of  these  forms  is  the  tech- 
nically proper  one.  It  alone  accords  with  the  old  established 
rule  of  the  common  law  of  agency,  that,  where  a  xhe  best 
contract  is  made  through  an  agent,  the  principal  ^°''"- 
must  be  directly  named  as  the  contracting  party,  properly 
with  the  addition  of  further  words  sufficiently  indicating  that 
the  principal  in  this  particular  case  is  contracting  through 
the  instrumentality  of  A.  B.,  authorized  agent,  and  the  signa- 
ture must  be  in  like  manner  of  the  name  of  the  principal,  with 
the  additional  intimation  that  it  is  written  by  his  agent  on 
his  behalf.^*  But  though  it  is  safest  and  wisest  always  to 
indorse  in  this  manner,  and  so  to  obtain  the  full  protection  of 
the  ancient  and  general  principle,  yet  special  decisions  have 
declared  other  forms,  theoretically  less  correct,  to  be  sufficient. 

1*  Wild  V.  Bank  of  Passamaqnoddy,  3  Mason.  505.  See  also  Folger  v. 
Chase,  18  Pick.  63-  Spear  v.  Ladd,  11  Mass.  04;  Northampton  Bank  v. 
Pepoon,  11  Mass.  288;  Corser  v.  Paul,  41  N.  II.  21;  Fay  v.  Noble,  12 
Cush.  1 ;  Elliott  v.  Abbott,  12  N.  H.  549. 

1*  Spear  v.  Ladd,  11  Mass.  94. 

331 


§  158  THE   CASHIER. 

So  it  can  no  longer  be  questioned  that  the  second  and  third 
forms  Avill  bind  the  bank.^^  The  words  ai)pended  in  those  to 
the  cashier's  name  certainly  signify  very  clearly  that  he  was 
indorsing  officially,  and  on  behalf  of  the  bank,  and  that  the 
contemporaneous  intention  and  understanding  of  both  parties 
was  that  the  bank  should  be  bound  by  the  indorsement.  As  a 
matter  of  fact,  probably,  in  all  such  cases  that  ever  occurred, 
the  undertaking  was  really  that  of  the  bank,  and  the  law, 
Avilh  its  usual  flexibility  in  such  circumstances,  founa  little 
diliiculty  both  in  sustaining  it  as  such,  and  at  the  same  time 
in  adroitly  saving  the  integrity  of  the  ancient  theory.  It  was 
declared,  as  appears  by  the  cases  cited  in  the  last  note,  that, 
since  the  intent  was  to  be  regarded  as  sufficiently  certain  upon 
the  face  of  the  instrument,  the  holder  was  authorized  to  write 

above   the   signature  the   phrase   "  For  the Bank,"    or 

«  The Bank,  by,"  &c.,  or  any  other  words  that   might 

be  necessary  fully  to  express  and  to  carry  out  the  intent ;  also, 
that  he  might  strike  out  any  superfluous  or  inconsistent  words 
originally  written.  The  authorities  which  adopt  this  theory, 
and  support  the  legality  of  indorsements  made  in  the  described 
forms,  are  ample  to  put  the  matter  beyond  the  possibility  of 
any  future  doubt.  The  only  contrary  decision  to  be  found  in 
the  reports  is  one  rendered  by  the  Supreme  Court  of  the 
State  of  New  York,  and  this  was  very  brusquely  disposed  of 

15  state  Bank  v.  Fox,  3  Blatchf.  431 ;  Bank  of  Genesee  v.  Patchin  Bank, 
3  Kern.  309;  Northampton  Bank  v.  Pepoon,  11  Mass.  288;  Folger  v. 
Chase,  18  Pick.  63;  Robb  v.  Ross  County  Bank,  41  Barb.  586;  Bank  of 
the  State  of  New  York  v.  Muskingum  Branch  of  Bank  of  State  of  Ohio, 
29  N.  Y.  632;  Mechanics'  Banking  Association  v.  New  York  &  Saugerties 
White  Lead  Co.,  35  N.  Y.  505;  Elwell  v.  Dodge,  33  id.  336.  In  this  case 
it  was  held  that  the  indorsement  of  "A.  B.,  president,"  should  be  construed 
as  the  indorsement  of  the  corporation  upon  proof  furnished  of  the  uniform 
usage  of  the  corporation  to  indorse  thus  through  its  president.  Ordinarily, 
the  president  has  no  authority  to  indorse  on  the  corporate  behalf.  INIarine 
Bank  o.  Clements,  3  IJos.  600.  The  principle  in  this  case  is  identical  with 
that  illustrated  by  the  other  citations.  It  has  been  held  in  Wisconsin, 
that,  though  the  indorsement  "  G.  B.,  Cas."  be  made  for  accommodation 
(and  therefore  wrongfully),  it  will  yet  bind  the  bank  as  towards  a  hona 
jide  holder  for  value  without  notice.  Houghton  v.  First  National  Bank 
of  Elkhorn,  26  Wis.  663. 

332 


INDORSEMENT.  §  158 

by  a  judge  iii)on  the  same  bench  a  short  time  after  it  had 
been  given.  His  language  was  as  follows  :  "  The  decision  in 
the  Bank  of  the  State  of  New  York  v.  Farmers'  Branch  of 
the  State  Bank  of  Ohio,  36  Barb.  332,  is  not  a  controlling 
authority  ;  for  I  understand  it  has  been  reversed  by  the  Court 
of  Appeals  ;  and  ice  must  presume  that  the  court,  m  f/iving  that 
decision,  were  not  aware  that  the  point  had  been  often  decided 
the  other  wayT  It  is  not  to  be  supposed  that  any  learned 
justice  will  ever  again  lay  himself  open  to  such  imputations 
upon  his  professional  knowledge.  It  is  going  a  good  way,  cer- 
tainly, to  uphold  the  third  form,  wherein  the  name  of  the 
corporate  principal  does  not  appear  at  all.  The  fact  of  what 
bank  the  indorser  was  cashier,  and  consequently  what  corpo- 
ration was  bound  by  his  signature,  must  be  shown  by  extrinsic 
evidence,  and  may  well  have  been  unknown  to  some  second  and 
even  of  the  holders  of  the  paper,  if  it  has  been  '^'"'^  ''^'■'"'• 
widely  negotiated.  But  the  adjudicated  cases  support  both 
forms  without  partiality.  Indeed,  they  almost  uniformly  dis- 
cuss only  this  third  form.  It  seems  as  though  the  second 
form  had  always  been  tacitly  admitted  to  be  good,  and  only 
the  third  had  held  out  hopes  enough  of  invalidity  to  encourage 
litigation. 

But  far  as  the  courts  have  gone  in  declaring  the  indorsement 
in  the  third  form  to  be  binding  as  the  indorsement  of  the  cor- 
poration, they  have  yet  much  further  to  go  if  they  Fourth 
are  resolved  to  sustain  the  validity  of  the  fourth  ^"""• 
form  as  a  corporate  undertaking.  We  find  no  adjudicated 
case  which  directly  settles  this  point.  But  Judge  Denio,  in 
the  case  above  cited,  of  Bank  of  Genesee  v.  Patchin  Bank,i^ 
declared  that  it  was  "  essential  to  the  operation  of  the  rule," 
(to  wit,  that  the  holder  might  supply,  in  the  second  and  third 
forms,  the  name  of  the  l)ank  in  such  shape  as  to  make  it  a 
principal  indorser,)  "  that  the  authority  of  the  indorser  to  in- 
dorse for  the  corporation  and  to  bind  it,  in  full  and  due  form, 
should  positively  appear.""  By  the  rule  of  §  154  h,  it  is  enough 
if  the  facts  make  this  authority  "  appear,"  whether  the  docu- 
ment indicates  it  or  not. 

(0    Countersigning,  as  for  example  of  the  bills  and  notes  of 

333 


§  159  THE    CASHIER. 

the  bank  intended  for  circulation,  may  unquestionably  be 
proi)erly  done  by  the  cashier  in  the  third  form.  If  the  marks 
of  an  orticial  character,  in  whatsoever  shape  they  may  be, 
predominate  upon  the  instrument,  as  they  must  upon  these 
bills  or  notes,  they  are  sufficient  notice  to  third  parties. 
Especially  if  the  word  "  countersigned "  be  written  or  en 
graved  in  connection  with  such  signature,  it  will  be  enough.^*' 

§  159.  Collection  of  Debts.  —  A  cashier  has  authority  vir- 
tute  officii  to  collect  debts  due  the  bank,  and  as  incidental 
thereto  he  may  receive  payment,  (though  not  in  anything 
but  money  unless  by  authority  other  than  is  inherent),  deliver 
securities,  pledges,  and  evidences  of  the  debt  paid,  or  dis- 
charge a  mortgage,  give  the  debtor  a  release  or  receipt,  in- 
dorse and  transmit  notes  to  the  place  where  they  are  payable, 
see  that  protest  is  made  if  necessary,  and  proper  notice  sent, 
and  employ  an  attorney  to  sue  for  the  debt.  But  has  no  in- 
herent power  to  compromise  a  claim. 

It  is  the  duty  of  the  cashier  to  superintend  the  collection 

of  debts  owing  to  the  bank,  and  to  make  up  the  accounts  of 

the  sums  due.     Payment  of  them  is  properly  made 

release,  or  re-  to  him  in  his  official  Capacity,  and  discharges  the 

turn  security,  ,,  ,      ,,  i  "•  i  .i 

or  discharge  dcbtor,  cvcn  though  tlic  cashior  subsequently  mis- 
mortgage.  r^ppropriatcs  the  moucy,  and  fails  to  bring  it  to  ac- 
count in  the  bank.  Upon  the  receipt  of  payment,  the  cashier 
may  deliver  up  the  evidences  of  indebtedness  held  by  the  bank, 
may  execute  an  acknowledgment,  release,  or  acquittance  to  the 
debtor  if  need  be,  and  may  deliver  and  transfer  back  to  him 
any  pledge  or  collateral  security  given  by  him  to  the  bank.i 

(a)  It  has  even  been  held  that,  where  the  borrower  had 
given  a  mortgage  of  real  estate  to  the  bank,  the  cashier  might 
legally  discharge  the  same  by  virtue  of  his  ordinary  author- 
ity. Or,  if  the  bank  has  bought  the  mortgaged  property  at 
sheriff's  sale,  the  cashier  may  assign  the  certificate  of  sale. 

"  Bank  of  Utica  v.  Magher,  18  Johns.  341 ;  citing  Mechanics'  Bank 
V.  Bank  of  Columbia,  5  Wheat.  334. 

1  §  150.    Concord  v.  Concord  Bank,  16  N.  H.  26;  Badger  v.  Bank  of 
Cumberland,  26  Me.  428;  United  States  v.  City  Bank  of  Columbus,  21 
How.  356. 
334 


COLLECTION   OF   DEBTS.  §  159 

It  makes  no  difference  though  the  instrument  may  require  to 
be  executed  under  the  corporate  seal.  The  party  who  has 
made  the  payment  is  entitled  to  the  discharge  or  assignment. 
In  seeking  to  obtain  it,  he  is  justified  in  dealing  with  the  prin- 
cipal business  officer  of  the  bank.^  After  all,  it  is  a  mere 
formal  act,  and  though  the  corporate  seal  may  be  required, 
yet  the  ordinary  assumption  of  the  importance  and  high  char- 
acter of  sealed  instruments  can  hardly  be  said  to  attach  to 
these  proceedings.  It  was  also  suggested  in  the  Bank  of  Ver- 
gennes  case,  that,  if  the  directors  alone  could  act  in  the  mat- 
ter, they  might  practically  rob  the  payer  of  his  legal  rights, 
either  by  refusing  to  meet  at  all,  or  by  neglecting  to  take  ac- 
tion in  the  premises. 

This  power  of  the  cashier  is  based  upon  the  fact  that  he  is 
the  officer  having  the  responsible  charge  and  control  of  the 
entire  personalty  of  the  bank  for  all  ordinary  executive  pur- 
poses ;  though  if  any  portion  of  the  personalty  has  been 
withdrawn  from  his  charge  and  control,  and  devoted  to  any 
special  use  by  the  government,  as  where  the  directors  had 
deposited  a  mortgage  in  pledge  with  the  State  authorities,  the 
power  and  responsibility  of  the  cashier  cease  in  respect  of  the 
portion  thus  appropriated  by  his  superiors  in  control.^ 

(J)  Whatever  preliminaries  are  necessary  to  precede  a  valid 

demand  for  payment  of  money  owing  to  the  bank  should  be 

attended  to  and  performed  in  due  shape  and  season   i„jorsement 

bv  the  cashier.     Such  are  the  indorsement  of  notes   and  trans- 
mission of 
payable  to  the  order  of  the  bank,  and  the  transmis-  notes  for 

sion  of  them  to  proper  agents  in  time  for  demand  if  P**- ""^"  ' 
they  are  i)ayablc  at  any  distant  place.  The  indorsement  must 
be  made  in  form  according  to  the  orders  of  the  directors  or  the 
established  usage  of  the  bank  in  its  dealings  with  the  agent 
to  whom  the  note  is  to  be  sent.  Thus,  it  may  be  an  indorse- 
ment in  blank,  an  order  to  pay  to  the  agent,  or  to  the  agent 
or  his  order,  or  to  the  agent  for  collection,  or  to  the  agent  or 
his  order  for  collection.  If  the  cashier,  whose  duty  and  au- 
thority it  is  to  make  the  indorsement  in  a  certain  one  of  these 

2  Ryan  v.  Dunlap,  17  111.  40;  Rank  of  Vergennes  v.  Warren,  7  Hill,  91. 
8  Mitchell  V.  Cook,  29  Barb.  243. 

335 


§  loy  THE   CASHIER. 

forms,  makes  it  in  another,  as  between  himself  and  the  bank 
it  is  a  breach  of  his  official  duty ;  and,  if  any  injury  result 
therefrom,  he  may  be  held  liable  in  damages. 

(f)  If  the  note  is  not  promptly  paid,  so  that  the  formalities 
of  protest  become  necessary,  it  is  the  duty  of  the 

Protest.  }  .  ,  ,  .       -,    , 

cashier  to  see  that  the  note  is  duly  sent  to  the 
notary  with  proper  instructions.* 

((/)  The  cashier  may  also,  it  has  been  said,  deliver  notes  to 
an  attorney  lor  collection,  authorizing  the  institution  of  suits 
Authorized  iipon  them,  if  it  be  necessary.^  In  this  case  the 
®"'''  court  finally  propped  the  decision,  which  it  at  first 

inclined  to  render  upon  general  principles,  by  stating  that 
the  particular  cashier  had  been  shown  to  have  done  the 
same  thing  before,  and  always  with  the  knowledge  and  sanc- 
tion of  the  corporation  when  it  became  notified  of  his  action. 
But  other  decisions  make  it  undoubted  law  that  a  cashier 
may  employ  an  attorney  to  collect  a  claim  without  any  reso- 
lution of  the  board,  although  that  board  has  appointed  counsel 
to  attend  to  the  bank's  legal  affairs.  The  power  and  duty  to 
collect  a  debt  necessarily  include  authority  to  set  the  legal 
machinery  in  motion  to  accomplish  that  result.  For  many 
purposes  the  officers  and  agents  of  a  bank  may  employ  per- 
sons to  perform  services  for  the  bank,  in  the  sphere  of  busi- 
ness that  belongs  to  the  agent,  and  it  has  been  often  declared 
that  a  managing  officer  or  cashier  may,  without  a  vote  of  the 
directors,  employ  counsel.^ 

The  cashier  cannot  appear  and  defend  suits  on  behalf  of  the 
bank.  Though  he  is  the  financial  officer,  and  in  charge  of  the 
books,  and  so  might  be  supposed  to  have  a  peculiar  knowl- 
edge in  the  matter,  he  cannot  answer  even  where  the  bank  is 

*  Hartford  Bank  v.  Barry,  17  Mass.  94. 

6  Eastman  v.  Coos  Bank,  1  N.  H.  23. 

«  Root  V.  Olcott,  42  Hun,  5.38  (1886);  Taylor  on  Private  Corporations 
having  Capital  Stock,  §'^02.  To  the  same  effect,  see  American  Ins.  Co.  v. 
Oakley,  9  Paige,  49G;  Peterson  r.  The  INIavor,  17  N.  Y.  449;  Mumford 
V.  Hawkins,  5  Denio,  355,  359  (1818);  Bristol  Bank  v.  Keavy,  128  Mass. 
298;  Frost  v.  Domestic  Sewing  ^lachine  Co.,  103  Mass.  563;  Western 
Bank  v.  Gilstrop,  45  Mo.  419 ;  Soiithgate  v.  Atlantic  &  Pacific  Railroad, 
61  id.  89,  94. 
336 


COLLECTION    OF    DEDTS.  —  COMPROMTSR.  §  159 

summoned  as  garnishee'  Tlie  only  case  where  he  has  been 
allowed  to  take  any  part  whatsoever  in  legal  proceedings  is 
one  which  was  decided  in  Illinois,  wherein  his  appeal  was 
allowed  to  be  good  on  behalf  of  the  bank.^  This  single  case 
is  so  utterly  at  variance  with  the  general  and  uniform  cur- 
rent of  opinions  upon  the  subject  that  it  might  very  proba- 
bly be  expected  to  be  overruled.  Yet  it  does  not  seem 
im reasonable  to  sustain  the  views  of  the  New  Hampshire 
bench. *^ 

(e)    It  has  been   said,   that,  in  the  course  of    his  fulfil- 
ment of  his  duty  in  taking  all   proper  measures  for  secur- 
ing the  eventual  collection  of   the   debt,  he  may   jjavcom- 
act  about  it  by  way  of  compromise.^     In  the  New   promise  in 

,  .        '  collection  of 

York  case,  wide  discretionary  power  is  restricted  debt  so  far 
by  the  addition  of  the  requisition  that  his  action  sanctions  his 
should  accord  with  usage  and  the  course  of  busi-  thrpower  L 
ness.  Unless  the  same  restriction  is  added  in  the  ^^^  inherent. 
Pennsylvania  case,  it  must  be  said  that  that  case  is  at  vari- 
ance with  general  principles,  which  it  cannot  be  potent  to  alter 
so  materially.  Without  these  words  it  must  be  simply  impossi- 
ble to  reconcile  these  decisions  with  those  which  have  been 
already  cited  as  conferring  upon  the  directors  the  power  of 
compromising  claims  of  the  bank.  Evidently  the  power  is 
discretionary,  and  one  which  in  its  exercise  may  often  call 
for  considerable  reflection  and  a  high  degree  of  judgment. 
It  is  strictly  a  sacrifice  at  least  of  nominal  property  of  the 
bank.  Clearly  it  should  be  a  function  of  the  board,  and  not 
of  the  executive  officer.  The  cited  decisions  must  be  con- 
strued simply  to  intend  that  this  function,  though  properly 
directorial,  is  nevertheless  not  inalienably  so,  and  may  there- 
fore be  delegated  to  the  cashier  ;  and  that  such  delegation 
may  be  conclusively  presumed  as  against  the  bank,  npon  proof 
that  the  usage  and  ordinary  course  of  business  in  the  bank  is 
to  that  effect.     Strictly  speaking,  this  is  all  that  the  cases 

f  Branch  Bank  v.  Poe,  1  Ala.  30G. 
*  Morelaiid  v.  State  Bank,  1  Breese,  205. 

^  Bridenbecker  v.  Lowell,  o2  Barb.  9;  Bank  of  Pennsylvania  v.  Reed, 
1  Watts  &  S.  101. 

VOL.  I.  22  337 


§  IGO  THE   CASHIER. 

really  decide,  and  it  is  obvious  that  they  should  not  be  care- 
lessly stretched,  as  if  they  announced  the  general  doctrine 
that  it  is  an  inherent  element  of  the  cashier's  general  au- 
thority to  compromise  on  behalf  of  the  bank  any  of  its  debts 
or  demands. 

In  a  later  case  the  New  York  Supreme  Court  said  that  a 
cashier  has  no  inherent  power  to  compromise  or  release  a 
claim  of  the  bank ;  such  business  calls  for  the  discretion 
which  belongs  inherently  only  to  the  board  of  directors.^*^ 

(/)  The  cashier  has  no  authority  to  settle  an  account  by 
taking  private  notes  and  drafts,  and  giving  a  receipt  in  full. 
No  inherent  That  involvcs  a  discrctiou  belonging  to  the  board, 
fakeanvthiug  P^^tics  claiming  a  discharge  otherwise  than  by 
but  money,  payment  must  show  the  cashier's  authority  to  set- 
tle with  them.i^ 

(^)  It  is  within  the  general  authority  of  the  cashier  of  a 
,,    ,      ,     bank  to  sign,  in  its  behalf,  a  blank  transfer  upon 

May  transfer  °    '  '  ^ 

stock  hold  as  a  certificate  of  stock  in  the  name  of  the  bank,  held 

collateral.  .  .  .  ,.»  ,  tit 

by  it  as  collateral  security  tor  a  loan,  and  deliver 
the  certificate  to  the  pledgor  on  payment  of  the  loaii.^^ 

§  160.  Borrowing.  —  The  cashier  has  inherent  power  to 
borrow  money  in  the  regular  course  of  the  business  of  the 
bank,  and  may  secure  the  loan  by  note  or  pledge  of  the  bank's 
property. 

The  cashier  may  borrow  money  on  behalf  of  the  bank,  and 
may  bind  the  bank  by  a  promissory  note  executed  therefor.^ 
Such  is  the  usage  of  tlio  banking  business ;  though,  if  in  any 
individual  institution  any  other  oflicer  is  selected  for  this  duty, 
the  cashier  could  no  longer  bind  the  bank  to  any  lender  who 
was  aware  of  the  variation.  The  right  of  borrowing  is  a 
function  of  which  he  will  be  wholly  deprived  by  the  act  of 

10  Chemical  National  Bank  v.  Kohner,  58  How.  Pr.  R.  2G7. 

"  Sandy  River  Bank  v.  Merchants'  Bank,  1  Bissell,  14G. 

12  Matthews  v.  Massachusetts  National  Bank,  1  Holmes,  39G  (1874, 
U.  S.) 

1  §  IGO.  Barnes  v.  Ontario  Bank,  19  N.  Y.  152;  Ballston  Spa  Bank  o. 
Marine  Bank,  16  Wis.  120;  Sturges  v.  Bank  of  Circleville,  11  Ohio  St. 
153;  Ridgway  v.  Farmers'  Bank,  12  Serg.  &  R.  25G. 
338 


BORROWING.  §  lf>l 

the  directors  in  selecting  any  other  person  as  their   if  thedirec- 
ffcneral  borrowing  agent.     But  the  usage  to  allow  I'!'"'*  '■estrict 

,  .  mm,  they 

him  to  borrow  is  so  universal,  that  notice  of  iJiP  ">"**'  notify 
deprivation  must  be  brouc/ht  home  to  any  person  tvho  The  cashier's 
is  to  be  affected  by  it.  Otherwise  the  public  are  covers  loans 
warranted  in  dealing  with  him  on  the  assumption  |IJ  eour'^se"of 
that  he  possesses  it.  The  power  extends  only  to  ''"^'ness. 
borrowing  in  the  ordinary  course  of  the  daily  business  of  the 
bank.  For  example,  if  the  bank  be  behindhand  at  the  clear- 
ing-house, the  casliier  may  properly  borrow  of  any  bank  which 
has  a  surplus,  giving  in  return  his  check  or  memorandum  for 
the  amount,  and  agreeing  to  pay  the  customary  rate  of  interest. 
But  he  cannot  borrow  simply  for  the  purpose  of  increasing  the 
available  funds  of  the  bank,  so  that  in  effect  its  disposable 
working  capital  shall  be  increased.  This  is  exercising  a  dis- 
cretionary control  over  its  affairs  which  none  but  the  directors 
possess.  Neither  in  any  case  can  he  borrow  money  to  use 
for  other  than  strictly  banking  purposes. 

(a)  A.  borrowed  money  in  the  bank's  name,  he  being  cash- 
ier, and  appropriated  it  to  his  own  use.  The  bank  denied  his 
authority,  and  the  holder  of  the  note  introduced  May  borrow 
evidence  of  the  custom  of  bankers  in  the  vicinity   °" '""?'  '5 

J      usage  justi- 

to  borrow  money  on  time,  which  was  admitted,  ^^*  '*• 
thereby  bringing  the  act  within  the  cashier's  inherent  powers, 
as  being  a  part  of  the  ordinary  routine  of  business.  Evidence 
of  other  fraudulent  drafts  drawn  by  the  cashier  on  other  banks 
was  held  not  admissible,  unless  the  payee  knew  of  them  before 
making  the  loan  in  question,  as  otherwise  he  was  not  misled 
thereby.^ 

(b)  A  cashier  having  power  to  effect  a  loan  may  (in  the 
absence  of  statutory  restraint  and)  in  the  ordinary 

course  of  business  secure  the  loan  by  pledge  of  the      ^  ^^' 
property  or  funds  of  the  bank.^ 

§  IGl.  Deposits. — The  cashier  is  the  proper  officer  to  receive 
deposits,  and  give  certificates  of  deposit  or  other  vouchers.^ 

2  Grain  r.  First  National  Rank  of  Jacksonville,  114  111.  516  (1SS5). 

8  Coats  I'.  Donnell,  94  N.  Y.  176. 

1  §  161.  jNIeichants'  Bank  v.  State  Bank,  10  Wall.  004. 

839 


§  163  THE   CASHIER. 

And  in  him  rests  the  power  to  accept  or  refuse  the  account 
of  one  who  wishes  to  become  a  depositor,^  though  his  decision 
may  be  overruled  by  action  of  the  directors. 

§  102.  The  Correspondence  of  the  Bank. — The  Cashier  has 
charge  of  the  correspondence  of  the  bank.  Letters  on  cor- 
porate business  are  properly  addressed  to  him,  and  whatever 
statements  or  information  are  contained  in  them  will,  in  law, 
affect  the  bank  with  notice.  If  the  subject  written  about  is 
one  in  which  he  has  no  authority  to  act,  or  no  duty  to  per- 
form, it  is  nevertheless  his  duty  to  communicate  the  contents 
of  the  letter  to  the  officials  within  whose  province  the  subject 
matter  falls.  It  is  his  duty  to  see  tliat  the  information  con- 
tained in  the  letter  is  promptly  laid  before  the  proper  person. 
A  cashier  has  no  power  to  contract  for  the  bank,  but  if  the 
negotiations  concerning  a  proposed  contract  are  conducted  by 
letters,  he  })ropcrly  writes  and  receives  these,  and  the  assent 
of  the  third  party  to  the  propositions  of  the  bank,  expressed 
by  him  in  a  letter  written  to  the  cashier,  affects  the  bank,  and 
completes  the  legal  contract.^ 

§  163.  Transfer  of  Shares.  —  The  Cashier  properly  makes  or 
superintends  the  transfer  of  shares.  Any  person  showing 
prima  facie  a  legal  right  to  demand  a  transfer  to  himself, 
may  demand  it  from  the  cashier,  or  from  any  other  principal 
officer  left  in  general  charge  and  superintendence  of  the  busi- 
ness of  the  banking-house.  Any  officer  who  can  properly 
make  the  transfer  at  all  will  be  protected  in  making  it,  with- 
out going  behind  the  apparent  legality  and  propriety  of  the 
demandant's  right,  in  order  to  determine  whether  or  not  there 
is  any  hidden  cause  for  objecting  to  it.^  A.  j^rimafacie  tiiXoi 
is  enough.  As,  if  one  who  has  bought  shares  sold  by  the 
State  assessor  for  taxes  asks  for  a  certificate  for  them,  the 
cashier  is  not  only  justified  in  giving  it,  but  it  is  even  his  duty 
to  do  so,  and  the  bank  cannot  subsequently  be  held  liable  on 

2  Thatcher  v.  Bank  of  State  of  New  York.  5  Sandf.  121. 

^  §  162.  New  F^ope  &  Delaware  Bridge  Co.  v.  Phcenix  Bank,  3  Comst. 
166;  Branch  Bank  v.  Steele,  10  Ala.  915. 

^  §  163.  Smith  v.  Northampton  Bank,  4  Cush.  1;  Commercial  Bank  of 
Buffalo  V.  Kortright,  22  Wend.  3i8. 
340 


SPECIAL   AUTHORITY.  §  IGf) 

the  ground  of  any  original  irregularity  which  should  have  alto- 
gether prevented  the  makincr  of  the  sale. 

§  1G4.  Government  Bonds.  —  Cashier  may  agree  for  tlie 
bank  to  buy  government  bonds.  In  all  transactions  in  which 
the  bank  may  lawfully  engage,  the  cashier  is  the  executive 
agent,  and  a  verbal  understanding  of  the  directors  will  not 
limit  liis  authority  as  between  the  bank  and  third  persons, 
when  his  acts  over  the  counter  are  of  a  public  character,  and 
numerous  and  long  continued. 

If  the  directors,  through  inattention  or  otherwise,  suffer  the 
cashier  to  pursue  a  line  of  conduct  for  a  considerable  period 
without  objection,  the  bank  is  bound.^ 

§  165.  Special  Authority.  —  Beyond  his  inherent  powers  the 
cashier  may  be  authorized  to  act  for  the  bank,  by  the  organic 
law,  by  action  of  the  stockholders,  by  vote  of  the  board  or 
their  verbal  order,  by  usage  and  tacit  approval,  and  by  neces- 
sity or  emergency  calling  for  action  manifestly  to  the  interest 
of  the  bank. 

The  last  section  closes  the  list  of  the  powers  and  duties 
which  the  cashier  may  exercise  simply  by  virtue  of  his  office, 
and  within  the  scope  of  which  he  may  bind  the  bank  by  reason 
of  his  being  held  out  to  the  world  as  cashier,  and  as  entitled 
to  fulfil  all  the  ordinary  and  inherent  functions  of  that  office. 
Outside  those  limits,  however,  there  are  great  numbers  of 
acts  which  are  frequently  undertaken  by  cashiers,  which  are 
strictly  consistent  with  the  nature  of  their  office,  and  which 
are  properly  allotted  to  them  for  performance.  Within  this 
wide  classification  may  be  included  everything  of  an  execu- 
tive character,  and  many  matters  partially  discretionary,  or 
discretionary  within  certain  limits,  so  that  in  delegating 
power  over  them  the  directors  do  not  in  fact  part  with  any 
governmental  authority,  or  divest  themselves  of  the  perform- 
ance of  any  inalienable  duty. 

(a)  That  corporate  agents,  especially  agents  having  such  large 
and  important  general  powers  as  are  enjoyed  by  bank   Exercise  of 
cashiers,  should  be  allowed  some  degree  of  latitude   ^'s^retion. 

1  §  164.  Caldwell  v.  National  Mohawk  Vallev  Bank,  Gl  Barb.  333 
(N.  Y.). 

341 


§  165  THE   CASHIER. 

of  discretion  is  inevitable,  and,  within  reasonable  limits,  is 
desirable.^  Hut  the  power  to  exercise  discretion,  except  in 
cumparatively  unimportant  matters  of  routine,  should  be  dis- 
tinctl}'  conferred  by  the  directors,  or  very  clearly  proved  by 
custom.  Even  if  it  be  thus  conferred  or  proved,  it  will  be  up- 
held only  upon  the  condition  that  it  is  not  a  material  encroach- 
ment or  usurpation  upon  the  governmental  province.  It  has 
already  been  seen  that  of  their  obligations  and  responsibilities 
of  this  high  nature  the  directors  cannot  strip  themselves  if 
they  would.  They  are  entitled  to  abdicate  only  by  means  of 
a  direct  and  formal  resignation. 

(5)  But  if  the  act  which  the  cashier  assumes  to  perform  is 
one  intrinsically  perfectly  proper  to  be  committed  to  his  charge. 
The  law  pre-   the  law  will  prcsumc  in  favor  of  a  third  partv  deal- 

sumes  regu-      .  .,,.         ,1,1  ti  .i.tI 

larity.  lug  With  him  that  he  was  duly  authorized  to  per- 

form it.  The  i)rcsumi)tion  is  not  conclusive,  and  may  be 
rebutted.  The  third  i)arty  simply  makes  out  a  jjrima  facie 
case,  which  the  bank  may  destroy  by  showing  that  neither  a 
directorial  resolution  nor  any  usage  had  justified  the  cashier  in 
his  assumption  of  power.^  In  fact,  the  third  party  relies  upon 
the  character  of  the  cashier,  and  trusts  that  that  ofRcer,  doing 
an  act  which  he  may  fairly  be  supposed  to  be  enabled  to  do,  is 
in  truth  acting  regularly  and  under  authority  of  some  sufifi- 
cient  description.  If  he  is  deceived  in  this  his  trust,  it  can 
only  be  said  that  he  voluntarily  ran  a  risk  in  relying  solely 
on  the  cashier's  assumption,  and  that  he  must  suffer  the 
consequences  of  having  neglected  to  assure  himself  from 
more  accurate  sources.  The  tendency  of  the  courts  is  al- 
ways, where  an  innocent  party  has  been  deceived  by  a  cashier, 
to  sustain  the   favorable  presumption  of  the   law,  if   it   can 

1  §  165.  Stamford  Bank  v.  Benedict,  15  Conn.  437. 

2  State  V.  Commercial  Bank,  6  Sm.  &  M.  218;  Commercial  Bank  of 
Buffalo  V.  Kortright,  22  Wend.  348 ;  Lovett  v.  Steam  Saw  Mill  Associa- 
tion, 6  Paige,  51;  Payne  v.  Commercial  Bank,  6  Sm.  &  M.  24;  Bank  of 
Vergennes  v.  Warren,  7  Hill,  91;  Harper  v.  Calhoun,  7  How.  (Miss.)  203; 
Farrar  v.  Oilman,  1  App.  440.  In  fact,  it  may  be  said  that  a  very  large 
proportion  of  all  the  cases  cited  in  discussing  the  powers  and  duties  of 
cashiers  indirectly  support  this  point.  Regularity  and  legality  are  always 
assumed. 

342 


SPECIAL   AUTHORITY.  §  1G5 

be  done  ;  but  they  cannot  disregard  or  overrule  positive  proof 
against  it. 

(f)  Power  may  be  conferred  upon  the  cashier  by  a  resolu- 
tion, general  in  its  terms,  and  not  requiring  to  be  repeated  when 
each  specific  occasion  for  the  exercise  of  the  power   ^^t^ority 
comes  up.'^     But  proof  that  no  resolution  was  ever   i>y  vote, 

tr  I  verbal  order, 

passed  by  the  board  in  the  premises  does  not  suince  usa^e,  or  ac- 
to  rebut  the  presumption  aforesaid.  This  is  only  'i"'^*''^^"'^®- 
one  of  the  props  on  which  it  is  assumed  to  rest.  Verbal 
directions  from  the  board  are  amply  sufficient.  Usage  and 
tacit  approval  still  remain  as  possible  or  probable  supports.^ 
All  these  must  be  negatively  disproved  before  the  burden  is 
shifted  upon  the  shoulders  of  the  innocent  dealer  or  contrac- 
tor.s  Neither  need  the  usage  be  specific  in  its  character,  nor 
confined  to  acts  of  precisely  the  same  description  as  the  one 
in  question.  If  the  directors  have  for  many  years  allowed 
the  cashier  to  do,  without  interference,  all  the  business  of  the 
bank,  they  are  held  thereby  to  have  conferred  upon  him 
authority  to  do  anything  and  everything  on  the  corporate  be- 
half which  the  charter  or  law  does  not  absolutely  prohibit  and 
forbid  a  cashier  to  do,  and  so  render  illegal  under  all  circum- 
stances. If  the  cashier  has  a  power  so  wide  and  liberal  as 
this,  it  is  needless  to  prove  a  usage  to  do  any  particular  act 
which  he  may  have  undertaken.  If  the  act  does  not  fall 
within  the  limits  of  unavoidable  and  inherent  illegality,  it  is 
valid,  and  binds  the  bank,  though  a  precisely  similar  act  may 
never  before  have  been  undertaken  by  the  cashier  since  the 
creation  of  the  institution.^  This  doctrine  is  certainly  a  lib- 
eral one  towards  innocent  outsiders.  One  case,  and  only  one 
case,  appears  to  have  gone  farther.  In  Pennsylvania,'  the 
court  were  discussing  the  power  of  the  cashier  in  relation  to 

8  Ehvell  V.  Dodge,  33  Barb.  336;  Rowland  v.  Myer,  3  Comst.  290;  Gil- 
lett  V.  Campbell,  1  Den.  520;  Bank  of  Yergennes  v.  Warren,  7  Hill,  91. 

4  Caldwell  v.  National  Mohawk  Valley  Bank,  G4  Barb.  333. 

6  Bank  of  Vergennes  v.  Warren,  7  Hill,  91;  Stamford  Bank  v.  Bene- 
dict, 15  Conn.  437. 

6  City  Bank  v.  Perkins,  4  Bosw.  420;  29  N.  Y.  554. 

'  Bank  of  Pennsylvania  v.  Reed,  1  Watts  &  S.  101. 

343 


§  1G5  THE    CASHIER. 

the  collection  of  debts  owing  to  the  bank.  They  declared 
that  he  had  power  to  compromise,  —  a  ruling  which  has  been 
already  discussed,  and  which  certainly  was  going  pretty  far. 

((/)  They  then  laid  down  this  remarkable  position,  that  in 
particular  cases  his  authority  may  be  extended  by  the  nature 
Authority  by  o^  ^^^^  agcncy  and  by  implication  arising  therefrom, 
necessity.  according  to  the  pressure  of  circumstances  in  the 
business  in  hand ;  and,  in  reference  to  the  facts  under  consid- 
eration, they  were  of  opinion  that  the  "  necessity  "  of  doing 
the  act  conferred  upon  the  cashier  the  power  to  do  it,  which 
otherwise  he  would  not  have  possessed.  There  is  certainly 
sound  reason,  and  probably  sound  law,  in  the  doctrine  that 
stringent  necessity  growing  out  of  the  unmistakable  interests 
of  the  bank  may  sometimes  justify  a  casliior  in  doing  on  its 
behalf  some  act  which,  in  the  absence  of  the  emergency,  he 
could  not  properly  do ;  provided  —  and  it  is  an  essential  pro- 
viso —  the  act  be  strictly  consistent  with  "  the  nature  of  his 
agency."  If  the  language  of  the  court  is  to  be  construed  as 
advancing  only  the  principle  that  extraordinary  cases  may 
arise  in  which  the  courts  will  sustain  the  cashier  in  an  act 
dictated  by  an  obvious  and  imperative  necessity,  which  he 
could  legally  perform  under  the  authority  of  a  usage  or  a  di- 
rectorial vote,  and  which,  it  must  be  presumed,  the  directors 
would  unquestionably  have  authorized  him  to  perform  had 
they  had  warning  of  the  need,  and  therefore  had  opportunity 
to  act,  —  if  this  is  what  is  intended,  the  doctrine  is  in  the  in- 
terest of  justice  and  common  sense,  and  may  well  be  adopted 
into  the  body  of  legal  principles.  But  if  the  theory  was  ad- 
vanced that  whatever  seems  necessary,  in  the  liberal  interpre- 
tation of  that  flexible  word,  to  be  done,  may  be  legally  done 
by  a  cashier  simply  by  virtue  of  that  necessity,  that  the  power 
grows  out  of  the  circumstances  of  the  particular  case,  it  is 
bad  in  law  and  mischievous  in  fact.  No  decision  of  any  other 
bench,  no  language  of  any  other  judge,  recognizes  the  exist- 
ence of  any  such  shifting  and  utterly  indefinite  test  of  the 
powers  of  a  cashier.  To  admit  it  would  simply  be  to  intro- 
duce complete  uncertainty,  and  to  encourage  litigation.  Few 
men  would  abandon  without  an  effort  the  chance  of  persuad- 
344 


AUTHORITY    BY    NECESSITY.  §  1G7 

ing  a  jury  that  it  was  in  fact  quite  "  necessary  "  for  the  cashier 
to  deal  as  in  fact  he  had  dealt. 

"  It  is  the  practice  for  the   cashier  of  a  bank  in   j)rcssing 
emergencies  to  rediscount  the  bills  and  notes  of  the  bank,  to 
raise  money  to  pay  depositors  and  meet  other  de-   Kefjj^count 
mands   of  the   bank.      But   this   is    onlv  done   on   justified  i)y 

"  .  iiecussity. 

extraordinary  occasions,  and  when  the  require-  Lamb  v. 
ments  are  such  as  do  not  admit  of  delay.  It  is  cus-  ^^^^^' 
ternary,  wherever  it  can  be  done,  to  consult  the  directors,  and 
obtain  their  consent  to  make  such  rediscounts.  It  is  a  mat- 
ter which  does  not  come  within  the  ordinary  duties  of  the 
cashier,  and  is  not  one  of  his  inherent  powers  ;  but  inasmuch 
as  it  is  a  power  which  is  exercised  by  him  under  some  cir- 
cumstances, a  transfer  of  such  bills  and  notes  made  by  him 
in  the  usual  course  of  the  business  of  the  bank  to  a  person 
who  has  no  right  to  doubt  the  propriety  of  the  transfer,  or  to 
question  its  good  faith,  will  be  prima  facie  valid,  and  vest  a 
good  title  in  the  transferee.  The  validity  of  the  transfer  in 
such  case  will  be  sustained  upon  the  ground  that  the  trans- 
feree had  a  right  to  presume  that  the  cashier  had,  from  the 
board  of  directors,  either  an  express  or  implied  authority  to 
make  the  transfer,  and  not  because  he  had,  by  virtue  of  his 
office,  inherent  power  to  do  so."  ^ 

§  166.  Notice  to  Cashier. — Notice  to  the  cashier  that  stock 
pledged  is  trust  property  is  notice  to  the  bank.^  Where  a  loan 
was  made  by  the  bank  to  a  trustee,  who  furnished  collateral 
securities  which  the  cashier  at  the  time  knew  to  belong  to 
the  trust  funds,  it  was  held  that  the  bank  was  chargeable  with 
the  knowledge  of  the  cashier,  and  was  put  upon  its  inquiry  as 
to  whether  the  trustee  had  authority  to  make  this  use  of  these 
securities.^ 

§  167.  Declarations  and  Admissions.  —  A  cashier  has  no 
power  by  his  representations  to  raise  any  obligation  that 
would  amount  to  a  contract  which  it  is  beyond  his  autlKjrity 

8  Iloyt  V.  Thompson,  1  Seld.  320;  Hartford  Bank  v.  Barry,  17  Mass. 
97;  Smith  v.  Lawson,  18  W.  Va.  212;  Lamb  v.  Cecil,  28  W.  Va.  659.  660. 

1  §  166.  Duncan  v.  Jaudon,  15  Wall.  165. 

2  Loring  v.  Brodie,  134  Mass.  453. 

345 


§  167  THE    CASHIER. 

to  make  directly  and  formally.  He  cannot  alter  the  effect 
of  an  indorsement  by  a  representation  that  the  indorser  will 
not  be  looked  to,  nor  bind  the  bank  in  any  way  by  a  decla- 
ration wdiich  would  not  bind  him  if  he  was  the  principal 
instead  of  an  agent  in  the  matter.  Nor  can  he  establish  the 
extent  of  his  authority  to  do  business  by  his  own  represen- 
tations. 

But  so  far  as  he  is  expressly  authorized  by  the  bank  or  the 
board  to  make  representations,  and  so  far  as  his  declarations 
are  made  in  the  course  of,  and  pertain  to,  business  in  which 
his  acts  are  the  acts  of  the  bank,  so  far  his  declarations  and 
admissions  (under  the  principles  of  §  103)  are  the  acts  of  the 
bank,  and  have  the  same  effect  as  if  made  by  the  principal 
under  the  same  circumstances. 

The  cashier  can  bind  the  bank  by  his  declarations  or  admis- 
sions only  when  his  power  to  do  so  is  a  direct  and  necessary 
implication  from  the  other  powers  confided  to  him  by  the 
bank.  His  authority  to  declare  or  admit  is  strictly  incidental, 
never  original.  When,  however,  the  statements  satisfy  these 
requirements,  they  may  be  given  in  evidence  for  or  against 
the  bank  with  the  like  effect  as  the  authorized  admissions  or 
declarations  of  any  other  agent  may  be  given  for  or  against 
his  principal ;  and  they  will  be  conclusive,  or  open  to  explana- 
tion or  to  rebuttal,  according  to  the  same  general  rules.  It  is 
likewise  necessary,  not  only  that,  so  far  as  the  intrinsic  nature 
of  the  admission  or  declaration  is  concerned,  the  cashier 
might  bind  the  bank  by  it,  but  also  that  he  should  make  it 
officially,  and  with  the  expressed  or  obvious  intent  actually  to 
bind  the  bank  by  it.  Thus  he  may  bind  the  bank  by  state- 
ments officially  made  in  relation  to  the  sale  of  bills  of  ex- 
change or  drafts,!  the  business  of  selling  and  negotiating 
them  being  within  his  province.  His  declaration  that  stock 
pledged  with  the  bank  is  held  in  trust  for  a  third  person  may 
be  given  in  evidence  against  the  bank  to  prove  notice  of  the 
trust; 2  it  being  his  duty  to  take  cliarge  of  all  the  property  be- 
longing or  pledged  to  the  bank,  to  know  by  what  title  and  in 

1  §  167.  Sturges  v.  Bank  of  Circleville,  11  Ohio  St.  153. 

2  Harrisburg  Bank  v.  Tyler,  3  Watts  &  S.  373. 

346 


DECLARATIONS.  §  167 

\7hat  capacity  the  bank  holds  the  various  items,  and  to  keep 
them  duly  ear-marked. 

On  the  other  hand,  it  can  never  be  pretended  that  he  has 
any  incidental  powers  to  bind  the  bank  by  declarations  or 
admissions  which  are  made  beyond  the  scope  of  his  duties. 
Thus,  his  statement  or  promise  given  to  a  person  who  is  about 
to  put  his  name  as  indorser  upon  a  note  which  the  bank  has 
agreed  to  discount,  to  the  effect  that  such  person  will  not  be 
lield  liable,  or  shall  nut  be  looked  to  by  the  bank,  is  altogether 
inoperative  and  void  as  an  undertaking  of  the  bank.  For  so 
far  as  the  business  of  discounting  is  concerned,  the  cashier's 
sole  power  and  function  is  to  pay  over  the  money  upon  the 
discounted  notes.  Collateral  contracts  or  agreements  of  any 
nature  are  altogether  beyond  the  range  of  his  employment. 
Declarations  or  admissions  in  the  nature  of  such  contracts  are 
equally  beyond  his  province,  and  consequently  equally  value- 
less with  the  contracts  themselves.^ 

(a)  Payment  made  by  the  cashier  upon  a  check  bearing  the 
forged  name  of  a  depositor,  or  by  way  of  redeeming  bills  or 
notes  falsely  purporting  to  be  those  of  the  bank,  is  the  pay- 
ment of  the  bank.  It  is  an  act  within  the  scope  of  the  cashier's 
authority,  and   cannot   subsequently   be  cither  re-  ^,       ,    . 

•'  '  1  r»o  authority 

called  or  repudiated.     He  is  intrusted  by  the  bank  to  answer 

Avith  the  duty  of  deciding  upon  the  genuineness  of  tothe°genu- 

such  paper  when  it  is  presented  for  payment  or  re-  pa^jj^rfex- 

demption.     But  if  such  paper  is  shown  to  him,  not  actsofpay- 

f or  the  purpose  of  demanding  payment  thereon,  but  ".'?"'  P""  *=^''" 

'      /        .  o  I     J  ^  5  tification. 

simply  to  inquire  whether  or  not  it  be  genuine,  his  But  see  be- 
erroneous  answer  that  it  is  so  will  not  bind  the 
bank  as  an  admission.  For  it  is  not  his  function  to  give  such 
information.  The  bank  does  not  intend  that  he  should  do  so, 
or  hold  liim  out  as  competent  to  do  so.  When  payment  is 
demanded,  it  is  an  inevitable  necessity  that  some  ojfficer 
should  decide  whether  or  not  the  paper  is  what  it  purports  to 

8  Bank  of  the  Metropolis  v.  Jones,  8  Pet.  12 ;  Bank  of  the  United 
States  i;.  Dunn,  6  id.  51;  Harrisburg  Bank  v.  Tyler,  3  Watts  &  S.  373; 
Merchants'  Bank  r.  Marine  Bank,  3  Gill,  96;  Cochecho  National  Bank  v. 
Haskell,  51  N.  H.  116. 

347 


§  167  THE   CASHIER. 

be,  and  this  necessity  the  bank  can  in  no  way  avoid,  without 
destroying-  the  possibility  of  banking  business.  But  to  answer 
all  questions  which  may  be  i)ut  concerning  the  genuineness  of 
the  paper  is  (piite  another  thing.  The  same  necessity  does 
not  exist  for  this,  and  the  bank  is  accordingly  presumed  to 
refuse  altogether  to  assume  gratuitously  a  task  of  such  dan- 
gerous responsibility.  Therefore,  if  the  cashier  undertakes 
to  answer  such  interrogatories,  his  act  is  wholly  beyond  the 
scope  of  any  authority  given  him  by  the  bank,  and  ought  to 
be  known  by  all  persons  to  be  so.  The  declaration  is  impo- 
tent to  conclude  the  bank.  Practically,  if  it  were  allowed 
binding  force,  it  would  amount  to  allowing  the  cashier  to  give 
a  valid  i^romise  on  behalf  of  the  bank  to  pay  what  the  bank 
does  not  in  fact  owe  ;  a  power  which  even  the  directors  could 
rightfully  exercise  only  in  extraordinary  cases,  if  ever.  The 
difference  between  a  payment  actually  made,  though  by  mis- 
take, and  an  executory  agreement  to  pay,  or  acknowledg- 
ment of  the  sufficiency  of  the  order  calling  for  payment,  made 
under  the  same  mistake,  is  certainly  wide  enough  to  admit  of 
this  corresponding  difference  in  the  respective  validity  of  the 
two  acts.* 

(b)  If  a  party  presents  a  check  drawn  on  a  bank  to  its  cashier 
„  ,       for  information,  and  the  cashier  savs  it  is  "  good," 

Kepresenta-  '  .07 

tion  as  to       the  bank  is  bound  by  such  answer  as  to  the  genuine- 

f^enuineness  p     1         t  7         •  ^  1  rf 

held  binding,  ncss  of  the  drawer  s  signature,  and  as  to  the  sum- 
u  s  s  c 

cicncy  of  his  funds,  but  not  as  to  the  genuineness 

of  the  filling  in.^ 

And  it  is  bound  in  spite  of  the  fact  that  the  cashier  knew 
there  were  no  funds,  if  the  party  to  whom  he  makes  the  asser- 
tion has  no  notice  of  its  falsity.^  It  is  part  of  the  cashier's 
business  to  give  information  to  checkholders  as  to  the  funds 
of  the  drawer. 

4  Bank  of  the  United  States  v.  Bank  of  Georgia,  10  Wheat.  333; 
Salem  Bank  v.  Gloucester  Bank,  17  Mass.  1 ;  Merchants'  Bank  v.  Marine 
Bank,  3  Gill,  96 ;  Farmers  &  Mechanics'  Bank  v.  Troy  City  Bank, 
1  Dougl.  457. 

5  Espy  V.  Bank  of  Cincinnati,  18  Wall.  604  (U.  S.). 

*  Farmers  &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125;  Credit  Co.  v.  Howe  Co.,  54  Conn.  357  (1887). 
348 


DECLARATIONS.  §  107 

(c)  111  the  case  of  Franklin  Bank  v.  Stewart,'  an  interesting 
point  in  tliis  subject  is  discussed,  which  cannot  be  better  eluci- 
dated  lluiu  ]>v  uresentin":  a  brief   summary  of  the    S(atements 

•-     '  °  .  as  to  a  past 

remarks   of  the    court.     Statements,    it   was    said,   transaction 

1  aru  mere 

concerning  a  past  transaction  are  given  purely  as  a  courtesies, 

matter  of  courtesy.     No  one  has  a  legal  right  to  [learon'a''^ 

demand  them.     Consequently,  a  cashier  in  making  f,'|„';"y,;||,. 

them  does  not  make  them  in  an  official  character,  or  ing  in  wiijch 

the  bank  is 

as  an  agent  of  the  bank  authorized  to  bind  it  by  them,  a  factor. 
The  most  that  can  be  said  is  that  the  bank  does  not  forbid 
him  to  do  an  act  of  ordinary  courtesy  ;  but  it  is  equally  far 
from  empowering  him  to  impress  upon  that  act  any  other  and 
more  serious  character.  In  Bank  of  Monroe  v.  Ficld,^  admis- 
sions as  to  the  fact  of  payment  having  been  made  ^^pon  a 
note,  were  held  admissible  as  constituting  a  i)art  of  the  7'es 
gestce^  but  ujfon  the  express  ground  that  they  were  shown  to 
have  been  made  upon,  and  as  the  result  of,  a  contempora- 
neous examination  of  the  books  of  the  bank  undertaken  for 
this  very  purpose.  But  if  the  statement,  though  it  concern  a 
past  transaction,  is  connected  with  a  present  dealing,  the 
reason  of  the  rule  fails,  and  the  rule  itself  shifts  to  the  oppo- 
site doctrine.  The  test  is  well  given  in  the  following  remark 
of  Sir  William  Grant,  in  the  cause  of  Fairlie  v.  Hastings^: 
"  Unless  the  agent's  statements  constitute  the  actual  agree- 
ment of  the  principal,  or  are  the  foundation  of  or  inducement 
to  that  agreement,  they  are  mere  naked  assertions,  not  proofs, 
of  the  fact ;  and  being  such,  they  amount  to  nothing."  The 
facts  of  Franklin  Bank  v.  Stewart  were  these :  A  messenger 
was  sent  to  the  bank  to  inquire  whether  a  certain  note  had 
been  paid.  He  did  not  tell  the  cashier  that  he  was  asking  on 
behalf  of  any  party  to  the  note ;  it  did  not  appear  that  the 
cashier  examined  the  file  of  notes,  or  any  of  the  books  of  the 
bank.  But  he  answered  that  it  had  been  i)aid.  In  truth  it 
had  never  been  paid,  and  at  that  moment  still  lay  among  the 
uncancelled  notes  of  the  bank.     Upon  the  strength  of   the 

T  37  Me.  519.  ^2  Hill,  445. 

s  10  Ves.  123.     To  the  same  point,  see  Lime  Rock  Bank  v.  Hewett,  52 
Me.  531. 

349 


§  167  THE   CASHIER. 

principles  above  propounded,  the  court  held  that  the  bank 
was  not  bound  by  this  statement  of  its  cashier,  and  this  even 
though  it  was  shown  that  a  surety  on  the  note,  relying  on 
that  statemjent,  had  given  up  security  which  he  held  from  the 
principal  promisor.  The  surety  had  taken  imperfect  means 
to  acquire  the  knowledge  he  desired,  and  his  loss  was  only  a 
natural  result  of  his  insufficient  thoroughness  in  the  transac- 
tion. The  opinion  delivered  by  Shepley,  C.  J.,  is  learned  and 
able,  but  two  members  of  the  bench  found  reasons  for  dissent- 
ing from  the  decision  of  their  comrades. 

In  any  suit  between  the  bank  and  that  surety  on  that  note, 
tlie  plain  principles  of  justice  would  estop  the  bank,  and  make 
it  responsible  for  all  loss  occasioned  to  the  surety  by  such  a 
representation.  The  cashier  has  charge  of  the  collection  of 
notes ;  he  receives  payments ;  and  on  what  could  the  surety 
rely,  or  any  person  having  dealings  with  a  bank,  if  not  on 
such  a  declaration  as  this  ?  The  following  cases  seem  far 
nearer  the  true  doctrine.     See  also  Certification. 

In  Nebraska  it  has  been  held  that,  where  a  surety  on  a  note 
is  erroneously  told  by  the  cashier  at  the  bank  that  the  note 
has  been  paid,  and  upon  the  strength  of  this  statement  be- 
comes surety  upon  another  note  of  the  same  maker,  the  bank 
will  not  be  able  to  recover  on  this  second  note.  It  does  not 
appear  in  this  case  that  the  cashier  knew  the  precise  object 
with  which  the  inquiries  were  made ;  but  he  obviously  had 
reason  to  suppose  that  they  were  not  made  altogether  idly,  or 
without  purpose.'*^ 

(c?)  The  bank  must  answer  for  loss  resulting  from  declara- 
tions of  its  cashier  to  an  indorsee  as  to  payment  of  a  note  held 
Representa-  by  the  bank,  and  the  fact  that  the  cashier  was  also 
mentofnote  an  iudorscr  docs  uot  alter  the  case.  The  cashier's 
biui\.  'e"ven  declarations  in  the  business  of  the  bank  and  perti- 
officei\adan  ^^'^^  ^^  ^^  ^^^  admissiblc  against  it.  The  bank 
adverse  inter-  claimed  that,  as  the  cashier  was  an  indorser,  his  in- 

est,  if  this  19  ' 

unknown  to    tcrcst  was  advcrsc  to  that  of  the  bank,  and  therefore 

part}'.  his  representations  did  not  bind  it ;  but  the  court 

said  that  releasing  an  indorser  by  his  statement  was  exactly 

10  Merchants'  Bank  v.  Rudolf,  5  Neb.  527. 

350 


DECLARATIONS.  §  168 

contrary  to  his  own  interest  as  an  indorscr,  as  it  destroyed  his 
right  of  contribution  from  such  person,  and,  even  if  his  in- 
terest were  antagonistic  to  that  of  the  bank  in  the  matter, 
the  bank  would  still  have  been  liable  ;  for  the  directors  knew, 
or  were  bound  to  know,  who  were  the  parties  on  the  note,  and 
if  they  allowed  the  cashier  to  stand  where  he  had  an  interest 
to,  and  where  he  could  and  did,  cause  loss  by  false  statements 
about  the  note,  it  would  seem  no  reason  to  throw  the  loss  on 
the  innocent  misled  indwser.^^ 

(/)  The  cashier  wrote  to  the  Secretary  of  the  Treasury  that 
the  bearer  was  authorized  to  contract  for  the  transfer  of  money ; 
such  a  contract  was  beyond  the  scope  of  a  cashier's   Representa- 
office,  and   therefore   his   representations   did   not   fl-om  fhe  ^ 
bind  the  bank,  and  it  did  not  have  to  make  good   ^copH'/ 
the  money  advanced  to  the  "  bearer."  ^  'i"'-'- 

A.,  the  cashier  of  a  bank,  was  asked  by  C.  about  the  solvency 
of  a  certain  firm,  F. ;  he  replied  favorably.  C.  bought  large 
amounts  of  the  bills  and  acceptances  of  F.  F.  failed,  and  C. 
sued  A.  and  the  bank.  The  court  said  that  the  bank  could 
not  be  held,  for  it  was  no  part  of  the  cashier's  business  to  give 
such  information ;  and  the  cashier  was  not  liable,  for  it  was 
only  the  statement  of  honest  opinion,  and  not  a  guaranty. ^^ 

§  168.  Of  Limitations  of  Time  and  Place  upon  the  Cashier's 
Powers.  —  The  place  where  and  the  time  when  a  cashier  is 
called  upon  to  do,  or  undertakes  to  do,  acts  on  behalf  of  the 
bank,  are  often  circumstances  materially  affecting  his  powers 
in  the  premises.  For  some  purposes  he  is  clothed  with  his 
official  character  only  at  the  banking-house  and  in  banking 
hours ;  for  other  purposes  he  remains  clothed  with  it  at  all 
times  and  places.  Xo  better  rule  for  discriminating  between 
these  two  classes  presents  itself  than  to  say,  that,  as  there  are 
some  acts  which  can  only  be  properly  performed  at  the  office 
of  the  corporation  and  during  the  hours  ordinarily  devoted 
to  public  business,  so  there  are  other  matters  which  may  be 
transacted  equally  well  at  all  times  and  places.     The  distinc- 

"  Grant,  v.  Cropsey,  8  Neb.  205  (1879). 

12  U.  S.  V.  City  Bank,  21  How.  35G. 

13  Horrigan  r.  First  Xatioual  Bank,  10  Leg.  News,  112  (Tenn.). 

351 


§  168  THE   CASHIER. 

tion  is  a  purely  practical  one,  arising  from  the  intrinsic  char- 
acter of  the  transaction  itself  regarded  from  a  business  point 
of  view. 

(a)    A  test,  which  is  perhaps  as  accurate  as  any  that  could 

be  suggested,  is  furnished  by  the  question  whether  for  the  due 

performance  of  the  business  there  are  requisite  any 

The  test.  t.  ,     ^  ,.  ...  ,     ,  .    n 

knowledge  or  appliances  which  can  only  be  satisfac- 
torily and  fully  possessed  by  the  cashier  when  he  is  at  the  bank- 
ing-rooms. It  is  easy  to  point  this  rule  with  examples  which 
will  be  serviceable  in  illustrating  its  precise  significance. 

(J)  Thus  it  cannot  be  pretended  that  any  sound  reason  could 
restrict  the  power  of  the  cashier  to  draw  checks  to  a  power 
,,     ,  to  draw  and  sign  them  only  in  the  office  of  his  own 

Maj'  draw  ,        °  ,  ''  _ 

checks  away  bank  and  in  the  ordinary  business  hours.  Even 
prudence  might  sometimes  induce  him  to  draw 
them  elsewhere,  as  at  the  rooms  of  the  drawee  bank,  to 
avoid  danger  of  loss  or  fraud. 

(c)  So  an  indorsement  may  be  made  away  from  the  bank. 
Irwin,  cashier  of  a  bank,  was  asked  to  discount  a  draft  paya- 
Indorseinent  hlc  to  liis  bank.  He  could  not,  so  M.,  the  cashier 
banfc  M™  0^  another  bank,  at  the  request  of  Irwin,  discounted 
good.  ^j^Q  jjjii  Qj^  ^-[^Q  street,  Irwin  indorsing  it.      Irwin's 

bank  was  held  by  the  indorsement.^ 

So,  if  any  person  wishes  to  impart  information  so  as  to 

warn  the  bank  or  to  affect  it  with  notice,  it  would  be  absurd 

to  say  that  he  could  do  so  effectually  only  if  he 

Cashier  may       ,        ,,  i        i  •  •        •  j        ji 

receive  notice  should  make  liis  Communication  to  the  casluer 
bank,  but  actually  within  the  walls  of  the  banking-house,  and 
give  iirforma-  bcforc  it  was  closcd  to  the  public  for  the  day. 
tion,  as  a  rule,  There  would  bc  uo  reason  in  such  restrictions,  and 

elsewhere.  ' 

there  is  no  law  in  their  support.  But  if  informa- 
tion be  sought  from  the  cashier,  it  should  be  sought  at  the 
banking-rooms,  where  he  can  have  access  to  the  books,  papers, 
and  records.2 

(c?)  But,  on  the  other  hand,  it  is  obvious  that  a  cashier  ought 
not  to  make  a  payment  upon,  or  to  certify  or  accept,  a  check 

1  §  168.  Bissell  v.  First  National  Bank  of  Franklin,  G9  Pa.  St.  415. 

2  jMerchants'  Bank  v.  Rudolf,  5  Neb.  527. 

352 


ACTS   AWAY   FROM    BANK,  §  168 

or  draft  when  he  is  away  from  the  hank.     Tic  may  have  been 
absent  from  the  bank  but  very  few  niinut(!s,  and  it   „ 

May  pay 

may  be  that  the  check,  if  presented  wlien  he  left,  orJertify 
would  have  been  properly  paid  or  certified  or  ac- 
cepted. Still,  even  in  that  short  interval,  the  drawer's  account 
may  have  undergone  so  material  a  change  by  reason  of  pay- 
ments made  or  drafts  accepted  on  his  account,  or  perhaps  by 
force  of  garnishee  process  served  upon  his  funds  in  the  bank, 
that  his  checks  could  no  longer  be  honored.  In  that  case  the 
payment,  certification,  or  acceptance,  having  been  wrongfully 
made  by  the  cashier,  would  become  his  own  individual  loss,  and 
he  would  be  obliged  to  reimburse  the  amount  to  the  bank,  if 
the  bank  should  see  fit  to  accept  and  ratify,  instead  of  repudi- 
ating, the  proceeding.  Clearly  the  same  must  also  be  the  case 
if  later  in  actual  time  than  the  payment,  certification,  or  ac- 
ceptance by  the  cashier,  but  still  prior  to  his  return  to  the 
bank  and  entering  or  noting  the  transaction  to  the  debit  of 
the  drawer,  or  informing  the  proper  officers  of  its  having  been 
made,  any  other  disposition  had  been  legally  made  of,  or  any 
other  valid  lien  had  attached  upon,  the  drawer's  funds  or 
credit.  Otherwise  a  loss  would  be  inflicted  upon  the  bank 
solely  and  wholly  by  reason  of  improper  conduct  on  the  part 
of  its  officer.  In  fact,  it  may  fairly  be  argued  that,  in  the 
supposed  case  of  the  payment  made  in  this  manner,  the  cash- 
ier practically  renders  himself  the  agent  of  the  drawer  for 
the  presentment  and  collection  of  the  check ;  and,  in  expecta- 
tion that  when  he  can  arrive  at  the  bank  and  present  it  there 
will  be  no  obstacle  to  its  full  payment,  he  ventures  to  ad- 
vance upon  it  to  the  drawer  its  full  face  value.  The  risk  of 
intermediate  transactions  diminishing  or  destroying  the  se- 
curity is  his  own  private  risk  ;  the  loss,  if  any,  is  his  own 
private  loss.  The  same  reasons  might  make  the  certifica- 
tion or  acceptance  binding  against  him  personally.  His  ac- 
ceptance thus  made  on  behalf  of  the  bank  can  be  repudiated 
absolutely  by  the  bank,  if  events  transpiring  before  his  return 
to  the  office  and  entry  or  report  of  the  transaction  would 
render  tiie  making  of  the  acceptance  at  the  time  of  the  return 
and  entry  or  report  improper.  This  would  at  least  be  the 
VOL.  I.  23  353 


§  168  THE   CASHIER. 

case  so  long  as  the  acceptance  remained  in  the  hands  of  the 
party  obtaining  it,  or  of  any  other  party  having  notice  of  the 
circnmstances  attendant  upon  its  making,  for  these  persons 
would  be  affected  with  a  presumed  knowledge  of  the  rule  of 
law  rendering  this  undertaking  of  the  cashier  irregular.^ 

(e)  Villi  sinee  the  instrument  would  jtrobably  be  perfectly 
regular  on  its  face  as  the  acceptance  of  the  bank,  and  would  in 
Bonafuk  fnct  havc  l)cen  executed  and  issued  solely  through 
iloidThe'"  the  im})roper  exercise  of  a  power  really  lodged  in 
bank.    See     ^^iQ,  officer  of  tlic  bank,  a  bona  Me  holder  for  value 

Ullra  vires,  '  *' 

§  722.  Qj^(]  -without  notice  would  be  allowed  to  enforce  it 

against  the  corporation.  Whether  the  bank  could  be  held 
by  the  acceptance,  if  the  cashier  on  his  return  failed  to  re- 
port it,  the  drawer  having  then  funds  enough,  is  a  difficult 
question.  It  cannot  be  said,  that,  in  making  the  acceptance, 
as  in  making  the  payment,  the  cashier  assumed  a  position 
in  any  degree  resembling  that  of  an  agent  for  the  liolder. 
On  the  contrary,  his  act  assumed  to  be  and  could  be  through- 
out only  purely  official.  Upon  his  return  to  the  bank  it 
was  his  duty  to  report  it  and  have  it  duly  entered.  This 
must  perhaps  be  regarded  as  his  official  duty.  Accordingly,  it 
may  be  argued  that  his  neglect  of  it  would  leave  the  bank  still 
bound  to  the  third  party,  though  entitled  to  hold  the  cashier 
liable  to  make  good  any  damage  to  itself.  On  the  other  hand, 
this  position  can  be  assailed  by  urging  that  the  transaction 
was  from  the  outset  void  as  an  undertaking  of  the  bank,  or,  if 
not  actually  void,  yet  so  far  irregular  and  invalid  as  against 
the  bank  that  it  can  be  made  good  against  it  only  by  a  thorough 
rcperformunce  in  full  of  all  essential  acts.  The  party  dealing 
with  the  cashier  may  well  be  held  to  take  the  risk  of  the  cash- 
ier's faithful  conduct  in  these  particulars  ;  which  the  bank 
cannot  possibly  be  regarded  as  warranting,  since  the  whole 
proceeding,  ah  initio,  was  directly  in  contravention  of  the 
principles  of  the  agency  which  it  had  established. 

(/)  An  interesting  and  important  question,  similar  but  not 

»  Bullard  v.  Randall,  1  Gray,  605.  The  opinion  in  this  case  was 
delivered  by  Chief  Justice  Shaw,  and  has  always  been  relied  upon  as  a 
thoroughly  satisfactory  and  conclusive  authority. 

f>04 


ACTS    AWAY    FROM    BANK.  §  168 

quite  identical,  is  raised  wlicrc  the  cashier  receives  pay- 
ments of  money  for  credit  on  an  ordinary  deposit  Deposits 
account,  when  he  is  away  from  the  bank.  This  I^.-ve.ilt'^uie 
limitation  is  annexed  to  tlie  simple  word  payment,  'j""'^- 
because  perhaps  the  case  of  receiving  payment  of  a  debt 
due  to  the  bank  mio-ht  be  different.  In  many  cases  the 
law  requires  the  creditor  to  make  demand  upon  his  debtor. 
And  unquestionably  a  cashier  may  follow  up  a  delinquent  or 
doul)tful  debtor  of  the  bank,  and  exact  payment  fi"om  him  at 
any  time  and  place  when  and  where  he  may  be  able  to  do  so. 
I>ut  where  money  is  offered  for  credit  on  a  deposit  account  it  is 
clear  that  it  should  not  be  accepted  away  from  the  bank.  The 
bank  does  not  contemplate  any  such  method  of  receiving  de- 
posits, but  has  provided  an  entirely  different  system.  Clearly, 
therefore,  it  does  not  empower  its  cashier  thus  to  receive  them. 
He  cannot  bring  them  instantly  to  account  in  the  bank,  nor 
secure  them  with  the  safeguards  always  provided  in  banks  for 
the  preservation  of  their  funds.     But  if  he  does  so   ..  ,.,    , 

r  Lntilactu- 

receive  them,  and  then  loses  or  misapplies  them   f  "y  r"t  ■" 

bank's  pos- 

before  he  has  actually  transferred  them  into  the  session,  the 
corporate  possession,  the  question  arises.  Can  the  ag^entofthe 
payer  hold  the  bank  to  make  good  the  amount  ?  '^P'^^'^"''- 
Clearly,  we  say,  he  cannot.  Even  though  the  cashier  mav 
have  had  the  identical  money  in  his  pocket  at  and  after  the 
time  of  his  return  to  the  bank,  nothing  short  of  his  actual 
transfer  over  and  bringing  it  to  account  in  the  bank  can  make 
the  bank  liable.  The  transaction,  even  in  this  form,  differs 
materially  from  the  case  of  an  acceptance  or  certification 
previously  supposed.  In  that  case  the  cashier  was  acting 
strictly  as  an  agent  of  the  bank.  He  could  possibly  do  the 
act  in  no  other  capacity.  Whereas  in  taking  the  money  it 
must  be  held  that  he  was  acting  as  agent  for  the  party  paying 
it ;  the  trust  and  object  of  his  agency  being  that  he  should 
make  the  payment  into  the  bank  to  the  credit  of  the  payer's 
deposit  account.  He  was  the  agent  of  the  payer  for  this  pur- 
pose, selected  as  a  convenient  agent  because  he  was  also  an 
agent  of  the  bank.  Tlie  money  Avas  paid  to  him  doul)tless 
because  he  was  cashier,  but  it  was  not  paid  to  him  as  cashier. 

355 


§  168  THE   CASHIER. 

The  latter  character  could  not  be  given  to  the  transaction,  even 
if  both  ])artios  souiiht  to  do  so  ;  for  they  must  both  be  affected 
with  knowledge  of  the  rule  of  law  which  I'cnders  a  payment 
made  under  such  circumstances  irregular  and  improper,  and 
so  invalid  as  against  the  bank.  It  is  fair  then  to  say  that  in 
no  part  of  the  transaction  can  it  be  admitted  that  the  cashier 
was  acting  officially,  even  though  irregularly  so.  His  act 
should  be  regarded,  not  as  irregularly  official,  but  as  abso- 
lutely unofficial.  Therefore  the  obligation  which  he  owed  to 
pay  the  money  into  the  bank  ran  to  the  party  paying  it  to  him' 
for  that  purpose,  not  to  the  bank  ;  his  breach  of  it  would  make 
him  liable  to  that  party,  not  to  the  bank  ;  the  loss  arising 
from  the  breach  must  be  borne  by  that  party,  who  was  in 
fact  his  principal  in  the  agency,  not  by  the  bank,  which  was 
known  to  all  concerned  to  have  strictly  excluded  any  such 
function  from  the  scope  of  his  ofhcial  agency. 

The  three  instances  adduced  differ  very  considerably  in  the 
force  of  the  arguments  which  can  be  brought  to  make  them 
respectively  acts  upon  which  a  liability  of  the  bank  can  be 
based.  But  it  seems  that  in  all  alike  the  non-liability  of  the 
bank  is  undeniable.  Though  the  cashier  ought  on  his  return 
to  the  bank  to  report  the  acceptance  he  has  made  on  its  behalf, 
or  to  pay  over  the  money  he  has  received  on  its  behalf,  and 
though,  if  he  should  then  promptly  report  and  enter  the  accept- 
ance, the  drawer's  account  might  make  it  good ;  or  though  he 
may  have  the  identical  funds  paid  over  to  him  still  in  his 
pocket ;  yet  in  both  cases  it  is  clear  that  the  person  dealing  with 
him  knew,  or  was  at  law  bound  to  know,  that  the  dealing  was, 
imder  the  circumstances,  irregular,  improper,  and  beyond  the 
scope  of  the  cashier's  agency.  The  transaction  might  be  capa- 
ble of  being  made  right  in  the  future,  when  the  cashier  should 
return  to  the  b;mk.  But  until  that  time,  and  until,  as  a  matter 
of  strict  fact,  it  had  actually  been  so  made  right,  it  must  be 
invalid  as  against  the  bank.  That  it  should  not  be  made  right 
at  all  is  a  chance  which  may  come  to  pass,  either  through  the 
mistake,  the  negligence,  the  innocent  loss,  or  the  fraud  of 
the  cashier.  Now  clearly  the  third  party  takes  the  chance  of 
the  mistake  or  the  loss,  and  why  not  equally  of  the  negligence 
356 


ACTS   AWAY    FROM   BANK.  §  1G8 

and  the  fraud  ?  He  trusts  that  cvcrythinj^  will  go  right,  that 
the  cashier  will  be  careful  and  honest.  But  the  sulliciency  of 
both  the  care  and  the  honesty  is  his  own  risk  ;  for  he  has  con- 
fided in  them  of  his  own  independent  motion,  not  under  the 
invitation  or  holding  out  of  the  bank,  but  in  fact  with  the 
express  knowledge,  either  actual  or  conclusively  inferred  at 
law,  that  the  bank  warrants  neither  when  they  are  relied  upon 
under  such  circumstances. 

(^)  The  decision  in  Pendleton  v.  The  Bank  of  Kentucky  '* 
docs  not  at  all  interfere  with  the  above  doctrine.  The  court 
certainly  remark  in  that  case  that  the  cashier  holds   „    , 

•^  Bank  may 

his  office  at  every  time  and  place.     But  the  point  adopt  cash- 
ier's act 
of  view  from  which  they  make  that  remark  explains   away  from 

its  intended  significance.  They  were  discussing  the 
question  of  whether  the  cashier's  conversion  of  money  improp- 
erly received  by  him  when  away  from  the  bank  was  a  default 
which  would  sustain  a  suit  upon  his  official  bond,  and  it 
was  in  the  course  of  declaring  that  it  would,  that  they  made 
the  above  remark.  It  cannot  be  questioned  that,  if  the  bank 
has  waived  the  irregularity,  and  adopted  or  ratified  the  im- 
proper act,  if  it  has  fulfilled  the  obligation  which  its  agent 
attempted  to  impose  upon  it,  it  has  done  simply  what  it  had  a 
right  to  do,  and  what  neither  the  officer  nor  his  sureties  can 
object  to.  There  is  nothing  originally  void  about  the  act,  noth- 
ing which  prevents  the  bank  from  subsequently  accepting  and 
ratifying  it.  It  is  unauthorized  and  therefore  voidable,  but  it 
is  no  more  than  this.  On  the  other  hand,  if  the  bank  exer- 
cises its  privilege  of  repudiating  the  transaction,  the  right  of 
action  against  its  cashier  cannot  accrue  to  it,  for  it  cannot  be 
allowed  to  take  the  two  inconsistent  positions  of  repudiating 
the  responsibility,  and  yet  claiming  damages  for  a  loss  which 
it  could  only  suffer  if  it  were  responsible. 

{h)  "Where  a  cashier  had  wrongfully  indorsed  a  note  "  G.  B., 
Cas.,"  and  inquiry  was  made  from  him  at  a  distance  from  the 
bank  concerning  the  note,  and  he  replied  that  it  a  represen- 
was  "  all  right,"  the  court  said  that  the  force  and  SoiXnk^' 
effect  of  this  statement,  as  against  the  bank,  were   ™*^'  ^'"'^• 
*  1  T.  B.  Mour.  171. 

357 


§  169  THE   CASHIER. 

no  wise  affected  by  the  consideration  of  the  place  where  the 
conversation  took  place.^  The  clement  of  place  was  evidently, 
under  the  especial  circumstances,  of  no  consequence  what- 
soever. An  inquiry  and  reply  as  to  any  other  note,  where 
the  cashier  might  be  supposed  to  speak  from  memory  and 
without  access  to  the  books,  papers,  and  memoranda  of  the 
bank,  might  not  improbably  be  differently  regarded. 

§  IGO.  No  Power.  ■ —  Thougli  the  cashier  may  dispose  of  the 
Cannot  piedj,'e  bauk's  negotiable  securities  in  the  reguhir  course  of 
ertv^orante-  busincss,  he  canuot  pledge  its  assets  for  the  pay- 
cedent  debt,    ^gjit  of  an  antecedent  debt.^ 

Where  a  claim  of  the  bank  has  been  pushed  to  judgment 

and  execution,   the  cashier  delivering  the  execution  to  the 

sheriff  to  levy  has  not  authority  to  bind  the  bank 

Agreement  to  *^  ■' 

indemnify      by  any  Undertaking  to  indemnify  the  ofiicer.     His 

sli6ri£f> 

agreement  to  this  effect,  though  ])urporting  to  be 
made  by  him  in  his  official  capacity,  will  be  invalid  as 
against  the  bank,  though  it  may  operate  to  hold  him  per- 
sonal ly.^ 

It  has  been  said  that  the  cashier  has  charge  of  all  promis- 
sory notes  due  to  the  bank.  But  though  he  thus  has  actual 
manual  possession  and  control  of  them,  yet  he  has  not  that 
legal  possession  which  will  enable  him  to  bring  a  suit  upon 
them  in  his  own  name.  His  possession  is  in  fact  only  custody 
which  the  court  will  not  recognize  as  an  absolute,  but  only  as 
a  qualified  possession,  not  carrying  with  it  the  presumption  of 
title  or  the  right  to  sue.^ 

A  cashier  cannot  virtute  officii  release  a  surety  upon  a  note 
held  by  the  bank,  even  though  the  bank  holds  other  security 
to  which  it  might  resort.  Special  authority  is  necessary  to 
justify  such  release.* 

6  Houghton  V.  First  National  Bank  of  Elkliorn,  26  Wis.  G63.  See 
Kennedy  .t;.  Otoe  County  National  Bank,  7  Neb.  59. 

1  §  109.    State  of  Tennessee  v.  Davis,  50  How.  447  (N.  Y.). 

2  Watson  V.  Bennett,  12  Barb.  196. 
8  Olcott  j;.  Rathbone,  5  Wend.  490. 

*  Merchants'  Bank  v.  Rudolf,  5  Neb.  527;  Cochecho  National  Bank 
V.  Haskell,  51  N.  H.  116 ;  Davies  County  Savings  Ass.  v.  Sailor,  63  Mo. 
21  (187G). 

358 


CONTRACTS  RUNNING  TO   CASHIER.  §  170 

(rt)  A  bank  is  not  bound  by  the  cashier's  contract  with  a 
broker  for  sale  or  j)urchase  of  real  estate,  unless  ^o  inherent 
previous  authority  be  shown,  or  unless  estopped  by  or^di  relky 
a  line  of  conduct  recognizing  such  acts.^  '""'■  '^^n'^- 

The  cashier  of  a  bank  is  not,  by  reason  of  his  official  posi- 
tion, presumed  to  have  the  power  to  bind  it  as  an  accommoda- 
tion indorser  on  his  individual  note  ;  and  the  payee   -^^ 
wlio  fails  to  prove  that  the  cashier,  as  such,  had   J"  i'xiorse 

*  .  bank's  name 

authority  to  make  the  indorsement,  cannot  recover   on  his  own 

against  the  bank.      The  very  form  of  the  paper   ^^^'^'^' 

carries  notice  to  a  purchaser  of  a  possible  want  of  authority  to 

make  the  indorsement,  sufficient  to  put  him  on  his  inquiry.^ 

§  170.    Instruments   executed  in  Form  to  the  Cashier.  —  The 

converse  of  those  cases  in  which  third  parties  seek  to  hold  the 

bank  upon  the  signature  of  the  cashier  is  to  be  found  in  those 

cases  in  which  the  bank  seeks  to  hold  third  parties  liable  to 

itself   upon  instruments  running   nominally   to   the  cashier. 

Here  the  general  rule  is  simple  enough.     If,  in  fact, 

.  T        1  , .  Intent  of 

the  contemporaneous  intent  and  understanding  at   the  parties 

the  time  of  entering  into  t\\Q  contract  or  obligation  ^'°^^'"°^' 
was  that  it  ran  from  the  third  person  to  the  bank,  or  to  the 
cashier  on  behalf  of  the  bank,  or  to  him  in  his  official  char- 
acter, then  the  bank  is  entitled  to  the  performance  and  benefit 
thereof,  and  may  enforce  this  right  at  law  precisely  as  if  it 
were  corporately  named  as  the  party  in  the  transaction,  in- 
stead of  only  its  cashier.  That  words  are  added  to  the  name 
of  the  cashier,  more  or  less  fully  descriptive  of  his  office,  is  a 
circumstance  which  is  properly  adduced  in  evidence  to  prove 
the  fact  of  intent  and  understanding;  and  though  it  cannot 
perhaps  be  said  that  the  addition  of  such  words  is  absolutely 
conclusive  of  the  corporate  character  of  the  transaction,  since 
a  cashier  might  be  described  as  such  for  purposes  of  identifi- 
cation, yet  it  is  clearly  very  strong  evidence  to  this  effect,  and 
might  perhaps,  if  nothing  repugnant  appeared  in  the  rest  of 
the  transaction,  be  regarded  as  making  out  a  prima  facie  case 

s  Winsor  v.  Lafayette  County  Bank,  18  Mo.  App.  G65. 
^  West  St.  Louis  Savings  Bank  v.  Shawnee  Co.  Bank,  95  U.  S.  557 
(1877) 

359 


§  171  THE   CASHIER. 

of  a  corporate  dealing.  Thus,  a  bill  or  note  indorsed  over  to, 
or  made  jjayablc  to,  "  A.  B.,  Cashier,"  may  be  sued  upon  by 
the  bank  in  its  corporate  name  and  capacity,  and  the  defect 
in  the  description  in  failing  to  name  the  bank  of  which  he  is 
casliier  may  be  supplied  by  parol  evidence  of  that  fact.^ 

A  bank  ordered  goods  lor  C,  who  was  unable  to  pay  at 
the  time ;  the  cashier  took  C.'s  paper  and  sent  the  vendor  a 
Contract  in  Certificate  of  deposit  signed  in  his  own  name  alone, 
uamT'^L.auk  ^^^^  ^^^^  ^^  cashicr.  Held,  that  this  was  in  the 
held.  ordinary  course   of  business ;  the  cashier  did  not 

exceed  his  authority,  and  the  bank  was  liable.^ 

§  171.  "When  the  Cashier  binds  the  Bank.  —  We  speak  here 
only  of  obligations  in  the  nature  of  contract. 

(a)  Those  acts  which  constitute  the  ordinary  and  custom- 
ary functions  of  cashiers,  and  which  he  has  inherent  power 
to  do,  bind  the  bank  as  its  own  acts  in  favor  of  any  pci'son 
dealing  with  the  bank  and  having  no  notice  of  any  restriction 
upon  tbe  cashier. 

1  §  170.  Stamford  Bank  i'.  Ferris,  17  Conn.  259;  Barney  r.  Newcomb, 
9  Cush.  46;  Wright  v.  Boyd,  3  Barb.  523;  Johnson  v.  Catlin,  1  Williams, 
87;  Erwin  i\  Branch  Bank  at  Mobile,  14  Ala.  307;  Baldwin  v.  Bank  of 
Newbury,  1  Wall.  234.  We  cannot  do  better  than  refer  the  reader  espe- 
cially to  the  opinion  in  the  last-named  case.  Tt  is  conclusive  of  the 
whole  question ;  and  its  array  and  discussion  of  the  authorities  are  exhaust- 
ive.    See  also  Nave  v.  Hadley,  74  Ind.  155  (1881). 

A  note  payable  to  "  Wes.  Lane,  Cashier  First  National  Bank  of  Leb- 
anon," is  payable  to  the  bank,  and  the  bank  can  maintain  suit  thereon 
in  its  own  name  without  indorsement.  Nave  v.  First  National  Bank  of 
Lebanon,  88  Ind.  204  (1882). 

2  Crystal  Plate  Glass  Co.  v.  First  National  Bank,  12  Pacific  Rep.  678; 
6  Mont.  303. 

Whether  evidence  can  be  introduced  to  show  a  usage  to  transfer  to  the 
cashier  with  the  design  that  the  transfer  shall  operate  in  fact  as  a  transfer 
for  the  use  of  the  bank,  must  be  regarded  as  still  unsettled.  If  intro- 
duced, it  would  be  for  the  purpose  not  of  varying  the  contract,  but  of 
interpreting  it:  not  of  controlling  any  rule  of  law,  but  of  explaining  the 
intention  of  the  parties.  On  this  ground,  it  has  been  held  admissible  in 
Connecticut;  but  by  a  divided  court.  Stamford  Bank  v.  Ferris,  17  Conn. 
259.  In  Massachusetts  a  contrary  opinion  was  intimated,  though  not 
directly  laid  down.  New  England  Mar.  Ins.  Co.  v.  Chandler,  16  Mass. 
275,  278  (per  Parker,  C.  J.) 
3G0 


WHEN    THE    CASHIER    BINDS    THE    BANK.  §   171 

(5)  Acts  beyond  this  line  of  inherent  ])0\vcr  are  the  acts 
of  the  bank  only  by  reason  of  express  authority  given  by  the 
organic  law,  the  stockholders,  or  the  board  of  directors,  or  hy 
reason  of  the  conduct  of  the  hank  or  its  management,  in  allow- 
ing the  cashier  to  continue  an  open  course  of  conduct  without 
objection,  or  receiving  the  benefits  of  his  act  with  knowledge 
of  the  facts,  or  otherwise  ratifying  his  doings. 

This  distinction  should  be  kept  ever  in  mind  ;  it  is  not  the 
act  of  the  agent  that  can  give  him  authority,  it  must  arise  by 
actual  gift  of  his  principal,  or  the  conduct  of  the  principal 
must  be  such  as  to  base  a  proper  inference,  such  as  a  pru- 
dent business  man  would  draw,  that  the  agent  acts  with  the 
approval  of  the  bank. 

(c)  But  when  u])on  this  principle  it  is  decided  that,  as  be- 
tween the  bank  and  the  third  party,  C,  the  act  is  that  of  the 
bank,  and  not  the  cashier's  individual  act,  the  further  question 
arises.  Is  the  bank  bound  ?  It  does  not  follow,  because  an 
act  is  that  of  the  bank,  that  it  is  necessarily  bound  by  it,  for, 
like  an  infant,  a  bank  is  incompetent  to  do  some  acts,  and 
some  contracts  are  utterly  void,  no  matter  who  makes  them, 
as  those  that  are  immoral  or  against  public  policy. 

If  the  act  is  that  of  the  bank  and  intra  vires,  i.  e.  such  as 
the  bank  has  power  to  do,  and  is  in  proper  form,  it  is  binding. 

But  if  the  transaction,  though  that  of  the  bank  under  the 
above  principles,  is  informal,  or  is  ultra  vires,  i.  e.  an  act  be- 
yond its  charter  powers  and  their  incidents,  the  bank  may  or 
may  not  be  bound.     See  §  722. 

If  the  act  is  not  that  of  the  bank,  and  is  not  ratified  or 
adopted  by  the  bank,  it  is  not  bound.  For  example,  if  a  loan 
is  contracted  by  the  cashier  in  such  a  manner  that  it  does  not 
bind  the  bank,  it  cannot  be  considered  that  the  mere  circum- 
stance of  his  turning  the  money  into  the  mass  of  the  bank 
funds,  and  allowing  it  to  remain  there,  and  to  be  used  as  part 
of  the  floating  assets,  will  suffice  to  render  the  bank  liable 
upon  it  as  a  corporate  debt.  The  fact  and  nature  of  the 
transaction  must  in  some  way  be  brought  sufficiently  home  to 
the  official  knowledge  of  the  directors,  so  that  their  failure 
to  repudiate   and   undo  it  must  be  construed  to  amount   to 

361 


§  171  THE   CASHIER. 

an  acceptance  and  ratification  of  it  on  behalf  of  the  corpo- 
ration.^    We  will  now  notice  the  cases  on  these  points. 

(tZ)  There  arc  certain  functions  which  it  is  the  duty  of  a 

cashier  to  perform,  and  certain  acts  whicli  lie  has  the  rijiht 

to  do  on  behalf  of  the  bank,  siiunlv  bv  virtue  of  his 

Certain  inlie-    .  .  .  . .  m  •    i 

rent  po\yeis  iiiductioii  iiito  the  ohicc.  1  hey  are  inherent  in  it, 
and  taken  together  they  constitute  the  component 
parts  which  go  to  make  it  up.  Others  may  be  added,  but  these 
are  essential.  Publicly  to  call  a  person  by  the  title  of  cashier 
is  to  invest  him  with  the  power,  as  towards  the  public,  of 
binding  the  bank  by  his  action  in  pursuance  or  fullilment  of 
any  and  all  these  inherent  powers  and  duties.  It  is  in  fact  a 
declaration  of  his  agency.  If  the  bank  nominates  and  holds 
out  A.  B.  as  its  "  cashier,"  it  in  effect  says  to  the  world  that 
A.  B.  is  duly  authorized  to  transact  on  its  behalf  all  business 
whicli  judicial  decisions  or  banking  usages  have  rendered  in- 
herent functions  of  the  oHice  designated  by  this  name.  Any 
act  done  by  him  within  this  scope  and  on  behalf  of  the  bank 
is  the  act  of  the  bank.^ 

It  would  seem  almost  a  work  of  supererogation  to  make  this 
statement,  but  we  have  been  led  to  do  so  by  noticing  in  the 
argument  made  lately  by  very  eminent  counsel  in  an  important 
case,  that  where  the  bank  charter  or  the  general  banking  act 
under  which  the  corporation  was  established  gave  to  the  di- 
rectors the  power  to  define  or  limit  or  prescribe  the  powers 
and  duties  of  the  cashier,  their  neglect  so  to  do  left  the  cash- 
ier without  either  powers  or  duties.  The  position  is  novel, 
perhaps  ingenious,  but  certainly  utterly  untenable,  and  has 
since  been  so  held  by  the  court.^  The  conference  upon  any 
person  of  the  name  and  official  position  of  cashier  carries 
with  it,  by  a  necessary  and  a  strictly  legal  implication,  certain 
duties  and  certain  powers,  towards  both  the  bank  and  the 
public,  of  the  nature  above  described.  Again  and  again  has 
this  fact  been  recognized  in  judicial  decisions,  equally  where 
the  directors  were  and  where  they  were  not  endowed  by  the 

1  §  171.  Ballstou  Spa  Bank  v.  Marine  Bank,  16  Wis.  120. 

2  Burnham  v.  Webster,  19  Me.  232. 

'  IMerchants'  Bank  v.  State  Bank,  10  Wall.  604. 
362 


WHEN    THE    CASHIER    BINDS   THE    BANK.  §   171 

law  originating  the  corporate  being  with  authority  to  define 
or  prescribe  the  powers  and  duties  of  the  oOicers ;  equally 
where  they  had  and  wliere  they  had  not  undertaken  to  exer- 
cise this  authority.  Tliese  are  the  functions  ordinarily  ap- 
purtenant to  the  office  itself.  They  in  no  case  re(|uire  to 
have  their  existence  affirmatively  established,  but,  on  the 
other  hand,  demand  strong  negative  testimony  to  controvert 
the  legal  presumption  of  their  universal  force.  The  great 
bulk  of  the  cases  which  will  be  cited  in  illustration  of  the 
present  topic  proceed  upon  the  tacit  recognition  of  this  doc- 
trine ;  but  in  the  foot-note  are  cited  a  few  of  those  wherein 
the  language  more  distinctly  asserts  it.*  In  the  case  of  The 
United  States  v.  The  City  Bank  of  Columbus,  Mr.  Justice 
Wayne  said  that,  "  though  the  directors  had  power  under 
the  act  of  incorporation  to  fix  the  duties  of  the  cashier,  and 
though  whether  they  had  done  so  or  not  did  not  appear," 
yet  "  the  acts  of  the  cashier  done  in  the  ordinary  course  of 
the  business  actually  confided  to  such  an  officer  may  well  be 
deemed  prima  facie  evidence  that  they  fell  within  the  scope 
of  his  duty."  As  a  matter  of  fact,  directors  seem  seldom  to 
have  cared  to  draw  up  regulations  for  the  government  of  their 
cashiers,  and  when  they  have  done  so  their  regulations  have 
been  so  general  in  phraseology,  or  have  so  accurately  followed 
the  principles  which  the  law  itself  lays  down  in  the  absence 
of  such  directorial  acti(jn,  that  they  appear  seldom,  if  ever, 
to  have  affected  the  decision  in  any  reported  cause.  That  the 
power  given  .to  directors  to  define,  &g.  the  powers  and  duties 
of  a  cashier,  docs  not  enable  them  to  deprive  him  of  ordinary 
powers  which  by  virtue  either  of  judicial  decisions  or  of  bank- 
ing usages  the  public  are  entitled  to  regard  as  inherent  in  his 
office,  or  at  least  that  their  action  to  this  effect  would  not  be 
binding  as  towards  any  third  party  who  had  not  been  ex- 
pressly notified  of  it,  is  a  principle  which  has  been  discussed 

*  Sturges  V.  Bnnlc  of  Circleville,  11  Ohio  St.  153;  Minor  i'.  Mechanics' 
Bank  of  Alexandria,  1  Pet.  46;  Wild  v.  Bank  of  Passamaquoddy,  3 
Mason,  505;  Bank  of  Pennsylvania  v.  Reed,  1  Watts  &  S.  101;  Baldwin 
V.  Bank  of  Newhurv.  1  Wall.  23 J;  United  States  v.  City  Bank  of  Coium- 
busj  21  How.  35G;  Badger  v.  Bank  of  Cuinberlaud,  26  Me.  428. 

363 


§  171  THE   CASHIER. 

iu  a  general  form  ^  in  Chapter  VIII. ,  and  which  needs  no 
special  elucidation  M'ith  respect  to  cashiers  as  a  class,  in  dis- 
tinction from  other  officers. 

If  a  cashier  negotiates  a  loan  for  other  than  banking  pur- 
poses, any  person  lending  to  him  with  a  knowledge  that  the 
loan  is  to  be  thus  improperly  used  will  not  create  a  valid 
obligation  upon  the  bank.  But  in  the  absence  of  such  actual 
knowledge,  the  presumption  of  regularity  will  bind  the  bank 
to  a  bona  fide  lender,  however  wrongful  and  unauthorized  the 
conduct  of  the  cashier  in  the  transaction  may  in  fact  have 
been.  So,  if  special  instructions  and  authority  are  given  to  a 
cashier  for  obtaining  a  loan  or  discount,  whether  the  same 
are  to  govern  him  generally  in  all  such  dealings,  or  only  in  a 
particular  instance,  all  persons  having  notice  of  this  special 
delegation  of  power  will  hold  the  bank  only  ui)on  contracts 
made  within  its  limits.  So  far  as  they  are  concerned,  it  is  a 
valid  restriction  of  the  cashier's  power  to  deal  with  them. 
But  contracts  with  persons  without  notice  will  bind  the  bank, 
if  within  the  ordinary  business  of  borrowing.  It  is  not  un- 
common to  empower  the  president  and  cashier  to  effect  a  loan 
or  discount ;  in  such  case  they  must  agree  upon  the  contract 
jointly,  and  the  cashier  alone  could  bind  the  bank  only  to 
persons  who  believed  him  to  be  acting  in  pursuance  of  his 
general  authority,  and  were  ignorant  of  this  special  delega- 
tion to  the  two  jointly. 

(e)  The  cashier  is  simply  an  agent  of  the  bank,  and  he  is 
bound  to  act  in  good  faith  in  the  transaction  of  the  business 
of  the  bank ;  and  those  who  deal  with  him  are  affected  by 
any  bad  faith  or  want  of  authority  of  which  they  have  knowl- 
edge. If  the  transaction  itself  is  not  in  the  usual  course  of 
business,  or  is  one  which  requires  specific  authority  oh  the  part 
of  the  cashier  to  perform  it,  the  person  dealing  with  him  will 
be  required  to  show  that  he  in  fact  had  authority  to  do  the 
act,  otherwise  it  will  be  held  to  have  been  done  without  au- 
thority.    If  the  cashier  transfers  the  notes  of  the  bank  to 

6  Also  see,  especially,  Bank  of  Vergennes  v.  "Warren,  7  Hill,  91;  Com- 
mercial Bank  of  Buffalo  t-.  Kortriglit,  22  Wend.  318;  Sturges  v.  Bank  of 
Circleville.  11  Ohio  St.  153. 
364 


ACTS   THAT   BIND.  §  1^1 

pay  his  private  debt,  tlie  transaction  will  be  invalid.  No  at- 
tempted transfer  by  the  cashier  of  the  bills,  notes,  or  other 
securities  of  the  bank  will  be  valid,  when  it  appears,  either 
from  the  nature  of  the  transaction,  or  the  facts  and  circum- 
stances existing  at  the  time  and  known  to  the  transferee,  that 
the  transfer  was  made  in  prejudice  of  the  rights  and  interests 
of  the  bank.^ 

(/)  A  bona  fide  holder  of  paper  is  not  affected  by  fraud  of 
the  cashier." 

An  overdraft  by  an  agent  of  his  principal's  account,  with 
the  knowledge  of  the  cashier  of  the  bank,  is  a  simple  loan  of 
money  by  accommodation,  and  the  authority  of  the  cashier 
cannot  be  questioned  in  a  suit  by  the  bank  to  recover  the 
money  .^ 

(^)  Where  for  nearly  a  year  a  cashier  had  under  his 
written  agreement  as  cashier  constantly  pledged  negotiable 
securities  with  another  bank  for  advances,  his  own  ^^^^^^^^^  ^^^ 
bank  was  bound  by  his  act,  as  his  previous  con-   by  failure 

-,   \  •  1    ii     i.  -i.    to  object. 

duct  had  been  so  open  and  long  contmued  that  it 

must  have  come  to  the  knowledge  of  any  ordinarily  vigilant 

directory.^ 

Evidence  of  powers  habitually  exercised  by  a  cashier  with 
the  knowledge  and  acquiescence  of  the  bank,  defines  his  pow- 
ers as  to  the  public,  if  they  are  such  as  the  directors  have 
authority  to  confer  on  him.^*^ 

A  bank  for  several  years  permitted  its  cashier  to  cancel 
trust  deeds  given  to  secure  money  loaned,  and  was  thereby 
estopped  to  deny  his  power  to  cancel.^^ 

(Ji)  If  a  cashier  of  a  bank  should  pay  to  a  hona  fide  holder 
a  forged  check  drawn  upon  the  bank,  the  payment  could 
not  be  recalled,  but  would  be  obligatory ;   for  it  is  within 

«  Everett  v.  United  States,  G  Port.  166;  Barnes  v.  Bank,  19  N.  Y. 
152;  Smith  v.  Lawson,  IS  W.  Va.  212. 

''  National  Pahquioque  Bank  v.  Bethel  Bank,  36  Conn.  325. 

8  Union,  etc.  v.  Rocky,  2  Col.  248. 

6  Mercantile  Bank  v.  McCarthy,  7  Mo.  App.  318  (1879). 

10  Merchants'  Bank  v.  State  Bank,  10  Wall.  604. 

"  Martin  i'.  Webb,  110  U.  S.  7  (1883). 

365 


§  171  THE   CASHIER. 

the  diitv  of  the  cashier  to  answer  drafts  drawn  on 

Cftsliicr's  * 

payment  of  thc  bank;  and  the  l)ank  intrusts  him  with  an  im- 
ilimiVthe^"^  phed  authority  to  decide  upon  the  genuineness  of 
'"'"'^"  the  handwriting  of  the  drawer  of  the  check  when 

presented  for  payment. ^'-^     Sec  contra,  §  4G1. 

The  same  rule  will  apply  to  the  payment  of  forged  bank  bills 
of  a  bank  by  the  cashier,  upon  presentment  by  a  bona  fide  holder. 
The  payment  cannot  be  recalled,  for  the  cashier  is  bound  to 
know  the  genuine  paper  of  the  bank.^^     But  see  §  633. 

(/)  Implications  and  Inferences  arising  from  Acts  of  the 
Cashier.  —  The  bank  is  bound  by  all  the  legal  implications  or 
inferences  which  must,  as  matter  of  law,  grow  out  of  those 
acts  of  the  cashier  which  he  does  in  the  prosecution  of  any 
of  the  functions  included  in  his  agency.  Indirectly  these  acts 
often  closely  resemble  declarations  or  admissions.  But  they 
may  bind  where  a  declaration  or  admission  might  not  bind, 
as  has  been  already  seen  in  the  cases  of  forged  paper  used  in 
illustration  above.  He  has  power  to  collect  and  to  give  re- 
ceipts for  the  sums  collected,  in  behalf  of  the  bank ;  he  has 
power  to  make,  or  to  direct  his  subordinates  to  make,  the 
entries  in  the  books  of  the  bank.  These  receipts  and  entries 
are  admissible  in  evidence  as  the  acts  of  the  bank  itself,  and 
if  the  mere  making  them  or  the  peculiar  form  of  expression 
used  in  .them,  have  any  technical  legal  force  or  effect,  the 
bank  will  be  concluded  thereby  as  by  the  necessary  legal 
sequence  of  its  own  doings.  In  Badger  v.  The  Bank  of  Cum- 
berland,^''  a  suit  was  brought  to  hold  the  defendant  corpora- 
tion as  owner  of  a  one-third  interest  in  a  vessel.  It  appeared 
that  a  debtor  of  the  bank  originally  owning  this  one  third  had 
bonded  it  to  thc  bank  to  secure  his  debt ;  that  afterward  he 
had  stated  himself  unable  to  pay,  and  had  abandoned  his  in- 
terest to  the  bank ;  that  thereafter  an  account  had  been  set- 
tled between  the  owner  of  the  remaining  two  thirds,  being 

12  Levy  V.  Bank  of  ITiiited  States,  1  Binn.  27;  Bank  of  United  States 
V.  Bank  of  Georfria,  10  Wheat.  333. 

18  Bank  of  United  States  v.  Bank  of  Georgia,  10  Wheat.  333 ;  Salem 
Bank  i\  Gloucester  Bank,  17  Mass.  1,  28. 

"  Badger  v.  Bank  of  Cumberland,  2G  Me.  428. 

366 


ULTRA    VIRES   ACTS.  §  l"*"! 

also  tlic  ship's  husband,  and  the  cashier  of  the  bank ;  that 
the  casliicr,  acting  in  his  official  capacity,  had  thereupon  re- 
ceipted for  what  appeared  by  the  account  to  be  the  bank's 
])roportion  of  the  net  earnings  ;  that  the  president  had  re- 
quested the  rendering  of  the  account,  and  had  insured  one 
third  of  the  vcsscFs  value  for  the  benefit  of  the  bank.  It  was 
held  that  the  cashier's  receipt  and  his  entry  of  the  transac- 
tion on  the  books  were  acts  within  the  scope  of  his  agency, 
and  that  their  legal  effect  and  significance,  as  proof  of  part 
ownership  by  the  bank,  could  not  be  controverted  by  the  bank. 
Also,  that  the  items  of  his  entries  in  the  books  were  conclu- 
sive proof  of  an  adoption  and  recognition  by  the  corporation 
of  the  president's  acts  in  effecting  the  insurance. 

(y  )  Cashier's  Ultra  Vires  Acts.  —  We  may  briefly  glance 
at  a  matter  which  will  be  fully  elucidated  hereafter.  The 
general  rule  in  regard  to  ultra  vires  acts  is  substantially  that 
executory  ultra  vires  contracts  will  not  be  enforced;  but  when 
acts  of  the  cashier  are  acts  of  the  bank  under  the  princi])lcs 
of  this  section,  and  they  raise  liability  in  tort,  this  is  not  to 
be  escaped  by  the  plea  of  ultra  vires,  nor  will  it  avail  in  case 
of  an  executed  contract  where  the  legislature  has  clearly  in- 
dicated an  intent  that  it  should  not  be  void,  nor  in  favor  of 
a  party  who  has  received  and  retained  benefit  under  it,  nor 
against  a  party  who  has  acquired  just  rights  by  expenditure  or 
parting  with  value  on  account  of  the  transaction  not  know- 
ing it  was  ultra  vires,  (that  fact  being  not  ascertainable  as 
matter  of  law  on  the  facts  actually  or  constructively  known 
to  such  person,)  keeping  in  mind,  of  course,  that  contracts 
expressly  void,  or  immoral,  or  against  public  policy,  will  not 
be  enforced,  for  the  maxims  in  pari  and  ex  turpi  causa  are 
supreme. 

In  a  Pennsylvania  case  '^^  the  bank  received  the  benefit, 
namely,  a  deposit  of  '|3,000  on  an  ultra  vires  contract,  and 
it  was  held  that  in  a  suit  to  recover  the  deposit  ultra  vires 
was  no  answer.  The  court  said  that  acts  done  by  the  cash- 
ier in  pursuance  of  the  orders  of  the  directors,  as  in  this  case, 
might  bind  the  bank,  though  in  contravention  of  the  charter, 
1^  Hagerstown  Bank  v.  Loudon  Savings  Fund  Soc,  3  Grant,  135. 

367 


§  172  THE   CASHIER. 

or  of  the  provisions  of  iLe  organic  law,  and  arc  therefore 
acts  whicli  in  fact  the  directors  have  no  power  to  authorize. 

The  case  of  The  Salem  Bank  v.  The  Gloucester  Bank  '^^ 
asserts  generally  that  the  bank  is  not  liable  for  the  act  of  the 
cashier  done  under  tiie  authority  of  the  directors,  if  they  have 
no  power  to  confer  that  authority.  The  general  rule  must 
be  admitted  to  be  thus.  But  in  this  Massachusetts  case  no 
strong  equity  tempted  the  court  to  consider  the  possibility  of 
admitting  a  limited  exception  to  the  broad  princijjle. 

§  172.  Liability  of  the  Cashier  to  the  Bank.  —  The  cashier 
contracts  for  reasonable  skill  and  care,  and  for  integrity  and 
obedience  to  the  law,  and  the  proper,  i.  e.  lawful,  directions  of 
his  superiors.  He  is  responsible  for  all  loss  resulting  directly 
from  his  failure  in  any  respect  in  his  official  duty,  and  it  will 
not  avail  him  that  he  acted  by  order  of  the  directors,  if  the 
facts  of  which  he  had  notice  made  such  order  wrongful  as 
matter  of  law.  If  so  far  as  any  facts  he  knew  or  had  con- 
structive notice  of  could  throw  light  on  the  matter  the  or- 
der was  lawful,  the  bank  cannot  hold  him,  for  it  is  not  his 
business  to  supervise  the  board,  and  it  is  his  business  to 
obey  them.  Such  is  the  law  of  this  topic,  as  clearly  appears 
from  the  following  cases. 

(a)  The  cashier  is,  of  course,  liable  to  the  bank,  in  an  action 
of  damages,  to  make  good  any  and  all  injury  arising  from  his 
fraudulent  or  wrongful  acts  of  an  official  nature,  from  his  un- 
authorized assumption  of  power,  or  from  his  breach  of  the 
directions  imposed  upon  him  to  govern  his  conduct  in  his 
agency. 1  How  far  he  is  responsible  for  innocent  errors  and 
mistakes  has  been  considered  under  the  topic  of  "  Official 
Bonds."  The  tellers,  book-keepers,  &c.  are  his  subordinates 
and  sub-agents.  But  he  is  not  answerable,  like  an  ordinary 
principal,  for  their  defaults,  whether  intentional  or  innocent, 
unless  perhaps  in  those  cases  in  whicli  it  can  be 
itvTor"subor-  sliown  Satisfactorily  that  the  default  was  occa- 
dinates.  gioncd,  or  opportunity  or  temptation  thereto  was 
furnished,  by  his  improper  or  negligent  performance  of  his 

10  17  Mass.  1. 
1  §  172.     Austin  v.  Daniels,  4  Den.  209. 

368 


LIABILITY   TO   BANK.  §  172 

duty  of  general  superintendence.  This  rule  is  supported  by 
the  necessity  of  tlie  business.  It  is  impossible  for  him  to  be 
omnipresent  and  omniscient  among  all  his  servants  in  the  in- 
stitution, and  he  is  not  liable  for  his  failure  to  perform  this  im- 
possibility. He  is  required  only  to  direct  them  properly  in  the 
performance  of  their  several  functions,  and  to  exercise  the  most 
thorough  supervision  which  is  practicable  in  view  of  the  amount 
of  daily  business  and  the  method  of  conducting  the  routine  of 
daily  affairs.  The  sub-officers  and  their  respective  provinces 
are  usually  well  known.  But  if  the  duties  which  arc  ordina- 
rily done  solely  by  the  cashier  become  too  onerous  to  be  exe- 
cuted by  one  man,  any  arrangement  for  a  partial  sub-delegation 
which  circumstances  authorize  the  cashier  in  assuming  to  be 
satisfactory  to  and  ratified  by  the  directors,  will  be  valid,  and 
will  thereafter  save  the  cashier  from  liability  for  frauds  or 
errors  committed  in  the  delegated  department.^  A  cashier  is 
not  bound  to  examine  every  entry  made  by  his  subordinates, 
but  must  exercise  such  care  and  supervision  as  a  man  of 
ordinary  prudence  would  in  his  own  affairs.^ 

Besides  the  right  to  a  suit  in  damages  which  grows  out  of  a 
cashier's  malversation  in  office,  specific  statutory  penalties  are 
often  affixed  to  specific  acts  of  wrongdoing.  Whether  the 
bank  by  suing  to  enforce  the  penalty  deprives  itself  of  the  right 
also  to  sue  in  damages,  must  be  decided  by  a  consideration  of 
the  nature  of  the  penalty.  It  is  a  fundamental  truth  that  the 
bank  has  a  right  to  be  reimbursed  in  money  for  all  its  losses 
directly  caused  by  the  wrongful  conduct  of  its  agent.  If  the 
provisions  establishing  the  penalty  make  any  satisfactory  ar- 
rangement for  this  reimbursement,  then  the  proceeding  for 
the  penalty  must  be  taken  as  clearly  intended  to  supersede 
the  proceeding  for  damages.  But  if  it  is  not  so  provided  in  the 
statute,  it  must  be  assumed  that  it  was  intended  that  the  two 
actions  might  be  prosecuted  independently  of  each  other.  The 
awarding  of  the  suit  for  the  penalty  is  akin  to  authorizing  the 
recovery  of  vindictive  damages,  in  addition  to  the  simple  dam- 
ages which  may  still  be  demanded  in  the  other  suit.     The  only 

2  Bank  of  the  State  v.  Comegys,  12  Ala.  772. 

8  Batchelor  v.  Planters'  National  Bank,  10  Rep.  16  (Ky.,  1880). 

vor,   I.  24  369 


§  173  THE    CASHIER. 

decision  of  interest  occurrino;  under  penal  statutory  provisions 
is  one  which  declared  that  a  penalty  set  upon  the  cashier's 
conversion  of  any  "  money,  bank-bill,  or  note  "  could  not  be 
applied  to  his  conversion  either  of  promissory  notes,  not  being 
bank-notes  ordinarily  so  called  and  intended  for  circulation 
as  currency,  or  of  any  otlicr  species  of  commercial  paper.'* 

(6)  Where  the  directors  authorize  the  act  which  has  caused 
loss,  if  there  is  any  intrinsic  illegality  or  impropriety  in  tlie 
Directors' or-  ^ct  itsclf,  the  cashicr  cannot  plead  either  the  for- 
excirse  an'^  mal  votc,  the  ratification,  or  the  connivance  of  the 
illegal  act.  government  of  thc  bank.  The  directors  can  by  no 
possibility  authorize  him  to  commit  a  fraud,  to  misapply  funds 
of  the  bank,  to  subject  them  to  improper  risks,  to  make  private 
profits  by  the  use  of  them.  He  can  by  no  possibility  believe 
that  the  directors  can  thus  authorize  him.  Tlie  question  is  not 
who  is  to  reap  thc  fruits  of  thc  malfeasance.  The  cashier  is 
responsible  for  obeying  an  order  which  he  knows  to  be  illegal, 
and  to  be  given  for  an  immoral  purpose,  equally  whether  he 
is  or  is  not  to  participate  in  thc  illicit  gains.  The  empty 
semblance  of  obedience  to  superiors  cannot  take  away  the 
genuine  character  of  connivance  in  a  wrongful  proceeding,  and 
would  be  "  void  to  protect  the  cashier  in  his  wrongful  com- 
pliance." ^  In  the  cited  case  it  was  held  that  the  cashier  could 
not  be  protected  from  liability  to  reimburse  a  loss  arising 
from  his  having  allowed  a  customer  to  overdraw,  by  showing 
that  the  directors  had  been  wont  to  countenance  him  in  a 
custom  to  allow  good  depositors  to  overdraw  without  taking 
security  from  them.  For  here,  it  was  said,  the  act  was  in- 
trinsically wrongful.  It  was  a  dishonest  use  of  the  corpo- 
rators' funds.  Being  thus  in  itself  inexcusable,  it  could  not 
be  excuse<l  l)y  a  mere  show  of  authority. 

§  173,  Cashier  as  a  Trustee.  —  It  has  never  been  held  that  the 
position  of  cashier  was  precisely  that  of  a  legal  trustee.  Yet 
the  qualities  of  a  trust  can  never  be  wholly  wanting  where  an 
agent  has  committed  to  him  the  care  and  management  of  the 

*  State  V.  Stimson,  4  Zabr.  9. 

^  IMinor  v.  Mechanics'  Bank  of  Alexandria,  1  Pet.  46;  Austin  v. 
Daniels,  4  Den.  299. 

370 


AND    IIIS   OWN   DEALINGS   WITH    THE   BANK.  §  1T3 

property  of  other  persons  for  certain  definite  purposes.  To 
say  that  lie  cannot  either  directly  or  indirectly  use  his  in- 
fluence, or  any  of  his  powers,  to  secure  advantages  to  himself, 
is  only  to  assert  what  has  never  been  called  in  (piestion  ;  and 
it  makes  no  difference  that  his  conduct  was  not,  or  was  not 
intended  to  be,  hurtful  to  the  bank.  If  he  wishes  any  species 
of  accommodation  from  the  bank,  even  though  he  might  have 
power  to  grant  the  same  to  any  other  person,  he  will  not  be 
safe  in  granting  it  to  himself,  without  express  permission  from 
the  board  of  directors.  The  familiar  rule  of  agency,  that  one 
shall  not  be  agent  for  any  other  party  in  a  contract  in  which 
he  is  himself  interested,  or  a  fortiori  in  which  he  is  a  principal 
on  the  other  side,  suffices  to  prohibit  this.  But  further  than 
this,  in  his  own  dealings  with  the  bank  he  is  held,  like  a 
trustee,  to  exercise  a  much  greater  degree  of  scru])ulosity  and 
thoroughness  of  regard  for  the  interests  of  the  bank  than  in 
tlic  conduct  of  like  dealings  had  by  other  people  with  it. 
Thus,  if  he  has  a  loan  from  it  and  gives  to  it  his  promissory 
note  for  the  amount,  if  he  does  not  pay  the  note  promptly  upon 
its  maturity,  it  will  not  be  enough  that  he  treats  it  precisely  in 
the  same  manner  in  which  he  is  wont  to  treat  other  unpaid 
notes  belonging  to  the  bank.  He  has  an  extraordinary  duty 
to  perform  in  regard  to  it,  and  must  bring  the  facts  of  its  be- 
ing overdue  and  unpaid  distinctly  before  the  directors  in  their 
official  capacity.  If  the  period  of  the  Statute  of  Limitations 
has  elapsed  since  the  date  of  the  note,  he  will  not  be  allowed 
to  take  advantage  of  it  simply  because  he  has  left  the  note  in 
the  bundle  of  unpaid  notes,  which  from  time  to  time  was 
examined  by  the  directors  for  the  purpose  of  putting  in  suit 
such  of  the  notes  contained  in  it  as  they  might  see  fit.  The 
statute  will  begin  to  run  only  from  that  date  upon  which  the 
cashier  can  establish  by  affirmative  proof  his  express  notifica- 
tion of  the  whole  matter  to  the  directors.^ 

(a)  But  if  the  cashier  embezzles  funds  of  the  bank  and  in- 
vests them,  a  court  of  chancery  has  no  power  to  fasten  a  trust 
upon  the    investment,  and   to   declare    the   cashier  to  be  a 

^  §  173.  Harrishui-g  Bank  v.  Forster,  8  Watts,  12.  See  also  Coiiyng- 
liam's  Appeal,  57  I'enn.  St.  474. 

371 


§  174  THE   CASHIER. 

trustee,  holdinitr  wliat  he  has  purchased  in  trust  for  the  bank. 
Property  The  uiero  faet  that  the  cashier  obtained  the  means 
8t"£'\muu  of  purchasing  by  a  theft  from  (lie  corporate  funds, 
not  sui.ject  to  provided   that  he   actually    made  the   purchase    in 

resulting  1  •_  '■ 

trust.  his  own   name  and  on  his  own  account,  does  not 

create  such  a  case  of  implied  or  resulting  trust  as  to  give 
jurisdiction  to  a  court  of  equity  for  the  jnirpose  of  taking 
possession  of  the  purchased  property  and  ordering  that  in- 
demnification be  made  from  it  the  bank.^ 

(/>)  Tlie  relation  of  trust  between  the  bank  and  cashier 
Equity  will  gives  equity  jurisdiction  to  compel  an  account  for 
k"t(MKLoun't.  money  misappropriated  or  other  breach  of  trust.^ 

In  the  second  case  quoted,  it  was  held  that  the  failure  of 
the  managers  to  repudiate  the  bond  and  mortgage  (given  by 
one  who  was  treasurer  and  one  of  the  managers  of  a  savings 
bank  as  security,  the  land  not  being  worth  double  the  mort- 
gage as  required  by  the  bank's  charter)  for  six  years  was  no 
defence,  whether  the  breach  of  duty  was  known  or  not  to  the 
other  managers.  The  fault  of  other  officers  could  not  take 
away  the  remedy  due  the  stockholders  against  this  one. 

§  174.  The  Cashier's  Subordinates.  —  Of  course,  even  in  a 
small  corporation,  it  will  be  impossible  for  the  cashier  person- 
ally to  do  all  the  business  included  in  these  general  functions. 
He  must  have  his  subordinates,  whose  offices  will  be  offshoots 
of  his  own.  "  They  arc  under  his  direction,  and  are,  as  it 
were,  the  arms  by  which  designated  portions  of  his  various 
functions  arc  ])erformcd."  ^  ])ut  he  will  not  be  liable  for  the 
default  of  any  of  these  subordinates,  unless  his  own  laches  or 
collusion  has  caused  or  aided  it.  The  paying  and  receiving 
tellers  are  in  fact  only  officers  detailed  to  take  charge,  each 
of  a  special  duty,  falling  within  the  general  range  of  the 
cashier's  position.^     A  paying  teller  can  only  pay  out  money, 

2  r.'iscoag  Rank  r.  Hunt,  3  Edw.  Ch.  583. 

8  iMerchaiits'  Bank  of  Charleston  v.  Jeffries,  21  W.  Va.  504  (1883); 
Williams  v.  Riley,  34  N.  J.  Eq.  398  (1881). 

1  §  174.  Merchants'  Bank  r.  State  Bank,  10  Wall.  004. 

■^  Farmers  &  IMechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y. 
125. 

372 


AND   HIS   SUBORDINATES.  §  174 

and  a  receiving  teller  can  only  receive  it,  on  behalf  of  the  bank. 
But  though  there  be  incumbents  acting  in  each  of  jgUgr-a 
these  respective  offices,  there  is  judicial  authority   power  not 

t^  '  •"  _         "^      exclusive  of 

for  saying  that  the  cashier,  by  his  general  and  higher   cashier,  but 

•'       °  ,  .  concurrent. 

power,  may  at  any  time  niaivc  or  receive  a  payment 
on  behalf  of  the  bank.  Perhaps  on  any  particular  occasion 
his  doing  so  might  be  such  a  foolish  interference  in  a  business 
of  which  he  did  not  know  all  the  details  from  hour  to  hour, 
that  he  could  be  held  liable  to  the  bank  for  negligence  or  an 
improper  performance,  if  he  should  pay  out  money  when  he 
ought  not.  But  this  would  be  only  a  question  of  liability 
arising  wholly  between  the  principal  and  the  agent.  The  act 
itself  would  be  within  the  scope  of  a  cashier's  authority,  and 
would  bind  the  bank  in  favor  of  any  innocent  third  party.'^ 
This  does  not  necessarily  conflict  with  the  rule  that,  if  the  bank 
nominates  a  certain  person  to  receive  money,  it  will  be  bound 
only  by  payments  made  to  him.  For,  though  the  bank  may 
nominate  a  receiving  teller,  yet  the  cashier  has  a  co-ordinate 
power  with  him  in  this  respect  by  virtue  of  the  general  scope 
of  his  agency.  The  bank  simply  has  two  officers  competent 
to  receive,  instead  of  only  one.     But,  though  the    ^   ^.     , 

"  ''  ...       Justice  of 

cited  case  seems  to  go  the  length  of  sustaining  this   the  ruling 

.    .  IT-  ji  •  p    .1        doubted. 

doctrme,  the  opmion  embodynig  the  views  ot  the 
court  is  far  from  carrying  perfect  conviction  with  it.  Practi- 
cally, the  confusion  incident  to  conducting  business  in  accord- 
ance with  the  rule  would  breed  endless  mischief.  As  matter 
of  strict  law,  it  is  certainly  fair  to  argue  that  the  especial  action 
of  the  bank  in  giving  to  another  the  charge  of  a  function  which 
otherwise  would  belong  to  the  cashier,  is  equivalent  to  a  public 
taking  away  of  that  function  altogether  from  the  cashier.  Sub- 
stantially it  is  expressio  U7iius,  exclusio  alterius.  The  teller  is 
the  cashier's  subordinate,  and  must  take  orders  from  him.  But 
the  precise  act  of  receiving  or  paying  cash  over  the  counter 
may  be  regarded  as  exclusively  within  the  teller's  province  by 
virtue  of  the  supreme  order  of  the  board  of  directors,  with 
which  even  the  cashier  cannot  interfere. 

(a)  Teller.  —  The  office  of  teller  is  a  narrow  one,  strictly 
3  State  Bauk  v.  Kain,  1  Breese,  45. 

373 


§  175  THE   CASHIER. 

limited  to  the  specific  function  of  receiving  or  paying  out  funds. 
If  tliei'c  be  two  tellers,  one  delegated  to  receive,  the  other 
delegated  to  pay  out  moneys,  neither  can  properly  discharge 
the  duty  of  the  other.  A  person  wishing  to  make  a  deposit  is 
bound  to  make  ii  with  the  receiving  teller.  If  he  hands  the 
money  to  the  paying  teller,  he  does  not  thereby  accomplish 
his  deposit,  but  only  makes  that  teller  his  own  agent  to  trans- 
fer the  money  to  the  receiving  teller  or  to  the  bank  ;  and  the 
bank  will  be  liable  for  the  amount  only  if  the  paying  teller 
fulfils  this  undertaking,  and  pays  in  the  money  to  the  proper 
officer  or  to  the  funds  of  the  bank.'* 

§  175.  Temporary  Substitute.  —  A  clerk  who  in  the  tempo- 
rary absence  of  the  cashiei-  is  charged  with  the  performance 
of  the  duties  of  that  office,  does  not  succeed  to  the  cashier's 
full  powers,  unless  by  virtue  of  a  special  vote  and  instructions 
from  the  board  of  directors.  Otherwise  the  cashier  can  clothe 
him  with  no  greater  power  than  simply  such  as  is  necessary 
for  carrying  on  the  usual  and  ordinary  business  of  the  bank, 
such  as  the  payment  of  checks,  the  receipt  of  payment  upon 
notes  held  by  the  bank,  and  the  delivery  up  of  the  paid  notes. 
But  the  delegate  has  no  authority  to  transfer  or  pass  title  in 
any  paper  of  the  bank.  Paper  held  by  the  bank  in  its  own 
right,  or  for  collection  for  other  persons,  and  payable  else- 
where, he  may  transmit  to  the  agents  of  the  bank  for  col- 
lection ;  and  if  it  requires  indorsement  as  a  j)rcliminary  to 
collection,  he  may  indorse,  but  only  in  such  limited  form  as 
is  strictly  indispensable  for  enabling  the  collection  to  be 
made,  and  not  so  as  to  vest  any  other  or  higher  title  in 
the  indorsee.  Where  he  so  sends  forward  notes  for  collec- 
tion, whether  bearing  his  indorsement  on  behalf  of  the  bank 
or  not,  the  agents  receiving  them  will  acquire  no  title  in  them 
and  no  lien  of  any  description  upon  them  for  any  balance  due 
from  the  transmitting  Ijank.^ 

§  176.  Cashier  after  the  Expiration  of  the  Franchise.  —  Where 
by  the  charter  itself  or  act  of  legislature  a  bank  is  continued 
in   existence   as  a  corporation  after  the  lapse  or  surrender 

*  Thatcher  v.  Bank  of  State  of  New  York,  5  Sandf.  121. 
1  §  175.     Potter  i-.  Merchants'  Bank,  28  N.  Y.  641. 
374 


THE   CASHIER.  §  176 

of  its  franchise,  for  a  limited  time  and  for  the  purpose  of 
closing  its  affairs,  the  directors  may  legally  appoint  a  cashier 
to  act  during  such  period.  Any  irregularity  attendant  upon 
the  choice  or  process  of  qualification  of  these  directors  will  not 
affect  the  validity  of  the  acts  of  the  cashier  chosen  by  them, 
provided  they  are  de  facto  directors,  assuming  to  be  such  under 
a  shadow  of  title,  and  acting  as  such  at  the  time  of  making 
the  appointment.^ 

(a)  Estoppel. — A  cashier,  by  performing  in  his  oificial 
capacity  acts  and  duties  which  are  not  inconsistent  with  the 
nature  of  his  office  and  functions,  may  be  held  to  be  thereby 
estopped  in  a  suit  against  himself  to  deny  that  their  perform- 
ance was  ordered  by  the  board  of  directors.^ 

1  §  176.     Cooper  v.  Curtis,  30  Me.  488. 

a  Durkin  v.  Exchange  Bank,  2  P.  &  H.  277. 

375 


CHAPTER  XII. 

RECEIVING  DEPOSITS. 

§  177.   Analysis. 

Choick.     Cashier's  authority.     §  161. 

§  178.  A  bank  may,  at  comiijon  law,  choose  from  whom  it  -vvill  receive 

deposits,  and  how  long  it  will  continue  to  do  business  with  any 
customer.  The  relation  may  be  broken  by  either  party  at  any 
time,  saving  the  existing  liens  and  contract  rights  of  both  parties. 

§  178.     (a)  Statute  law  sometimes   provides  against   receiving  deposits   from 
certain  persons,  as,  e.  g.,  those  reasonably  known  by  the  bank 
to  be  unsafe. 
Care 

§  179.  Should  be  exercised  by  the  depositor  to  make  delivery  to  the  proper 

officer  and  at  the  bank.     §§  98 j,  Ilia. 

§  181.  And  by  the  bank  to  give  credit  to  the  proper  party.     (See. case  of 

deaf  dej)ositor.) 
The  Receiving  Offxcek.     §  101. 

§  179.  The  cashier  or  teller  may  receive  deposits,  or  any  other  officer  actu- 

ally authorized  by  the  board,  or  who  has  habitually  received  them 
without  objection  from  the  bank. 

§  179.  No  officer  has  inherent  right  to  receive  deposits  away  from  the 

bank,  though  in  tliis  matter  also  the  bank  may  be  bound  by  a 
long-continued  course  of  conduct  without  objection  from  the  di- 
rectors. 

§  180.  If  the  same  officer  acts  for  two  banks  doing  business  over  the  same 

counter,  the  question  as  to  which  bank  is  the  recipient  of  a  given 
deposit  depends,  (1)  as  to  the  depositor,  on  his  understanding 
with  the  officer;  (2)  as  to  the  banks,  upon  the  agreement  between 
them  under  which  the  officer  acts. 

§  180  A.   Appkopriation  of  Deposits.     §§  323,  327  d,  556. 

§  178.  The  Relation  is  at  the  "Will  of  the  Parties.  —  From 
whom  Deposits  may  be  received.  —  It  is  of  the  essence  of  the 
The  bank  btisiiicss  of  baiikhig  that  the  bank  or  banker  should 
may  choose     rcceivc  on  dcDOsit  the  money  and  funds  of  other 

for  whom  it  r  j 

will  receive     persous.    In  receivinp;  dcDosits  and  opcnintr  accounts 

or  hold  ue-  iii-p  i  i  ••i'" 

posits,  except  the  bank  is  free  to  choose  whom  it  will  as  custom- 
hibfted'by'^"'  ers  from  among  those  that  offer.  No  duty  exists 
statute.  Qj^  ^1^^  j^g^j.j.  ^£  ^^^^  bank  towards  the  public  akin  to 

376 


RECEIVING   DEPOSITS.  §  179 

that  wliicli  binds  common  carriers  to  take  every  person  who 
requests  them  to  do  so,  and  who  is  in  a  fit  condition  to  be 
taken,  or  that  which  obliges  hotel-keepers  to  admit  any  proper 
applicant  as  a  guest.  The  bank  may  select  arbitrarily,  and 
cannot  be  held  accountable  to  any  person  for  the  propriety  of 
its  action  in  this  matter.^  The  receiving  a  deposit  from  a 
person,  without  explanation  or  understanding  to  the  contrary, 
at  once  and  without  more  makes  that  person  a  customer  of 
the  bank.  But  no  implied  undertaking  to  allow  him  to  con- 
tinue so  for  any  length  of  time  exists.  Neither  is  he  under 
any  obligation  to  continue  so.  The  relationship  may  be  dis- 
solved at  any  time  by  either  party,  saving  the  then  existing 
liens  and  rights  of  each.''^ 

(a)  In  Wisconsin  banks  are  prohibited  from  receiving  a 
deposit  from  any  one  whom  they  have  reason  to  know  is  un- 
safe or  insolvent,  and  this  is  held  not  to  contravene  the  Con- 
stitution of  the  United  States  or  of  Wisconsin.  It  is  not  a 
denial  of  the  equal  protection  of  the  laws  to  all  persons. 
IT.  S.  Const.,  Amend.  XIV.3 

§  179.  Depositors  should  be  careful  to  deliver  their  Deposits 
to  one  authorized  to  receive  them.  —  It  is  essential  that  the  de- 
positor should  deliver  his  money  to  an  officer  of  the  bank  who 
may  properly  receive  it  on  behalf  of  the  bank  ;  otherwise  the 
bank  will  not  be  liable  for  it,  if  it  should  be  lost  or  embezzled, 
or  should  become  worthless  during  the  course  of  its  transit 
into  the  hands  of  such  proper  officer.  Ordinarily  banks  in 
the  United  States  have  a  "  receiving  teller,"  so  called,  whose 
special  function  it  is  to  receive  funds  for  deposit.  If  there  is 
such  an  officer,  a  depositor  wiio  makes  his  payment  into  the 
hands  of  any  other  officer  simply  makes  that  recipient  his 
own  agent  on  this  occasion  for  the  purpose  of  transferring  the 
funds  to  the  bank,  or  to  the  receiving  teller.  If  the  officer 
fulfils  his  agency,  and  the  funds,  undiminished  in  amount, 
come  into  the  possession  of  the  bank,  or  reach  the  hands 
of  the  receiving  teller,  then   the  debt  of  the  bank  accrues. 

1  §  178.  Thatcher  v.  Bank  of  State  of  New  York,  5  Saiidf.  121. 

2  Chicago  Marine  &  Fire  Ins.  Co.  v.  Stanford,  28  111.  168. 
8  Baker  v.  State,  54  Wis.  368  (1882). 

377 


^180  RECEIVING    DEPOSITS. 

Otherwise  the  deposit  is  not  completed,  and  the  bank  is  not 
liable,  althougli  the  fault  be  wholly  that  of  its  ollicer  to  whom 
the  payment  was  originally  made.  The  corporation  has  not 
delegated  to  him  that  duty,  and  is  not  responsible  for  his  per- 
formance of  it.  Very  often  the  receiving  ofhccr  has  his  pecu- 
liar and  customary  stand  at  the  bank  counter,  made  kuown  to 
the  public  by  a  sign  bearing  the  words  "  Receiving  Teller." 
In  such  case,  it  would  seem  that  the  })ayment  should  be  made 
to  him  at  this  stand.  Certainly  it  must  be  made  to  him  within 
the  bankiug-rooms.  Otherwise,  until  he  has  brought  the 
money  into  the  banking-rooms,  its  safety  is  still  at  the  risk  of 
the  payer.  Neither  will  it  suffice  for  a  depositor,  seeking  to 
evade  the  consequences  of  these  rules  of  law,  to  show  isolated 
cases  of  a  contrary  practice  by  his  bank.  Solitary  instances 
of  payments  of  funds  to  another  officer  than  the  receiving 
teller  are  impotent  to  alter  established  principles.  So  long 
as  such  an  office  exists,  and  the  incumbent  continues  duly  to 
exercise  his  functions,  the  money  for  deposit  ought  in  some 
manner  to  reach  his  hands,  and  proof  of  its  occasionally  com- 
ing to  its  destination  through  the  hands  of  other  agents  of  the 
institution  is  not  enough  to  show  that  such  a  course  is  good 
and  sufficient  upon  those  occasions  when  it  fails  to  effect  this 
disposition  of  the  money.^ 

Delivery  of  a  deposit  to  the  cashier,  teller,  or  assistant  teller 
at  the  bank ,2  or  to  any  officer  of  the  bank  having  actual  au- 
thority to  receive  it,  or  authority  implied  from  usage,  is  good. 
For  example,  where  a  porter  had  for  years  been  accustomed, 
without  o])joction  from  any  officer,  to  receive  money  from  the 
express  company  at  the  bank,  clearing-house,  or  the  express 
office,  a  delivery  to  him  at  the  express  office  was  held  good.^ 

§  180.  Two  Banks  receiving  Deposits  by  same  Officer.  —  B. 
was  treasurer  of  a  savings  institute  and  cashier  of  a  bank, 

1  §  179.  Manhattan  Co.  v.  Lydig,  4  Johns.  377 ;  Thatcher  v.  Bank  of 
State  of  New  York,  5  Sandf .  121 ;  Sterling  v.  Marietta  &  Susquehanna 
Trading  Co.,  11  Serg.  &  R.  179;  Terrell  v.  Branch  Bank,  12  Ala.  502. 
But  see  East  River  National  Bank  v.  Gove,  57  N.  Y.  597,  in  which  the 
foregoing  cases  are  discussed  and  a  contrary  conclusion  is  reached. 

2  See  chapter  on  Cashier.     Hotchkiss  v.  Artisans'  Bank,  2  Keyes,  564. 
8  Sweet  V.  Barney,  23  N.  Y.  335. 

378 


RECEIVING    DEPOSITS.  §  181 

both  of  which  corporations  did  business  over  the  same  counter. 
The  institute  was  by  agreement  to  receive  no  money,  but  all 
its  funds  were  to  be  deposited  in  the  bank.  B.  received  from 
C.  at  the  counter  certain  money  which  she  wished  to  deposit 
in  the  institute ;  but  B.  embezzled  it  and  did  not  credit  it  to 
the  institute  nor  upon  the  cash-book  of  the  bank.  It  was  held 
that,  as  between  C.  and  the  institute,  B.  received  the  money  as 
its  treasurer ;  yet  as  between  the  bank  and  the  institute,  under 
the  agreement,  it  was  received  by  him  as  money  of  the  bank, 
and  the  bank  was  liable  to  the  institute  therefor.^ 

So  where  a  check  payable  to  B.  as  treasurer  was  received 
by  him  to  pay  money  due  the  institute,  and  was  indorsed  by 
him  as  treasurer  and  then  as  cashier,  and  remitted  for  col- 
lection, though  no  credit  was  given  the  institute  therefor  on 
the  books  of  the  bank,  the  check  had  become  the  property  of 
the  bank;  and  the  institute  could  recover  for  it.^ 

§  180  A.  Appropriation  of  Deposits.  —  The  depositor  may 
appropriate  his  deposits  ;  if  he  does  not,  the  bank  may  choose 
how  it  will  appropriate  them,  subject  to  the  rule,  that,  as  be- 
tween a  secured  and  an  unsecured  debt,  the  appropriation 
must  be  to  the  former  for  the  benefit  of  the  surety,  and  if 
neither  makes  an  appropriation,  the  law  will  appropriate  the 
deposits  in  accordance  with  this  rule.^ 

§  181.  Care  in  Crediting. —  The  deposit  must  be  carefully 
credited  to  the  proper  person.  Where  two  persons,  A.  and  B., 
came  to  make  a  deposit,  A.  handing  in  the  money  Deaf  depos- 
and  B.  saying  it  was  to  be  put  to  his  credit,  which  '*^°'"- 
the  bank  did ;  it  was  held  that  the  bank  was  negligent,  the 
fact  being  that  A.  was  deaf  and  did  not  hear  B.'s  order.^ 

1  §  180.  Fishkill  Savings  Inst.  v.  Bostwick,  92  N.  Y.  564. 
1  §  180  A.    Kimraird  v.  Webster,  10  Ch.  D.  139  (1878). 
1  §  181.  Winter  v.  Bank  of  New  York,  2  Car.  337.     See  Jackson  Ins. 
Co.  V.  Cross,  9  Heisk.  283. 

379 


chapti:r  XIII. 

KINDS   OF   DEPOSIT. 

§  182.    Analysis. 

Si-KCiAL.     §§  180,  505,  567.     Sec  §§  200,  507  c. 
§  183.  For  safe  keeping ;  identical  thing  to  be  restored  ;  created  by  express 

contract,  or  implied  from  circumstances,  as  the  fact  that  money 
is  sealed  up,  or  the  deposit  is  not  of  a  nature  that  can  be  credited 
on  general  account  as  cash. 
§  184.  Coin  may  be  a  special  depo.sit,  by  usage. 

The  presumption  is  in  favor  of  general  deposit  in  case  of  United 
States  coin,  and  in  favor  of  special  deposit  in  case  of  for- 
eign coin. 
Specific.     §§  206,  213,  565,  507,  500  et  seq. 
§  185.  Any  deposit  for  a  purpose  other  than  mere  safe  keeping  and  return, 

§  187.  or  credit  on  general  account,  is  a  specific  deposit,  as  collaterals,  or 

money  to  transmit,  or  to  pay  a  note. 
General.     §§  288,  505. 
§  186.  A  deposit  made  with  intent  to  pass  the  property  to  the  bank,  to  be 

§  187.  credited  on  general  account,  is  a  general  deposit,  and  the  presump- 

tion in  case  of  the  deposit  of  loose  money,  or  of  paper  or  coin 
credited  as  cash,  is  that  such  a  deposit  is  intended,  unless  there  be 
a  contract  or  usage  contra. 
§  186.    (a)  The  addition  of  such  titles  as  "  Clerk,"  "  Treas.,"  &c.  to  the  depos- 
itor's name  does  not  affect  the  nature  of  the  deposit. 
§  186.     (b)  If  checks  or  money  are  sent  with  an  order  to  credit  on  account,  and 
this  is  done,  the  deposit  is  general,  even  though  a  second  clause  in 
the  order  provides  for  paying  a  specific  note. 
Change  of  a  Deposit  from  one  Form  to  Another. 
§  187.  May  be  accomplished  by  an  agreement,  or  order  acted  upon,  or  by 

the  bank's  crediting  generally  a  specific  deposit,  or  the  proceeds 
of  one,  and  the  best  opinion  is,  that  when  this  is  done,  and  the 
specific  funds  mingled  indistinguishably  with  the  general  funds 
of  the  bank,  whether  rightfully  or  not,  the  depositor  can  only 
claim  equally  with  the  general  depositors  and  creditors. 
A  bank  may  put  up  the  amount  due  a  depositor  in  a  package,  and 
tender  it  to  him,  and  if  be  refuses  it,  tlie  bank  will  thereafter  be 
liable  only  as  a  gratuitous  bailee. 

§  183.  A  Special  Deposit  is  where  the  whole  contract  is 
that  the  thing  deposited  shall  he  safely  kept,  and  that  identi- 
cal thing  returned  to  the  depositor.^ 

1  §  183.  State  v.  Clark,  1  lud.  310 ;  Keeue  v.  Collier,  1  Met.  Ky.  417. 
380 


COIN.  §  184 

And  this  contract  may  arise  by  express  afrrccmcnt,  or  by 
the  nature  of  the  deposit ;  as  if  it  were  fijold  pUite,  or  money, 
or  securities  locked  in  a  box,  or  sealed  up  in  a  bag  or  pack- 
age.   (§102.,  A.) 

In  such  cases  the  presumption  is  that  the  deposit  is  special, 
though  in  case  of  the  deposit  of  loose  money  the  presumption 
is  the  opposite.^ 

§  184.  When  Deposit  in  Coin  is  Special.  —  In  Maryland  where 
gold  coin  was  deposited  and  an  entry  "  Cash,  (coin)  $3,000," 
was  made  in  the  depositor's  bank-book,  it  was  held   usageas 
that,  if  the  depositor  could  show  that  this  entry  by   nSur'J'o/a^ 
usao-e   or   by   special   circumstances,   imported   an   tiep^'S't- 

^  -'^  ,  ^    ■  •        -J.  u     Distinction 

agreement  to  repay  the  amount  m  com,  it  could  between 
only  be  so  repaid,  and  that  an  offer  of  legal  tender  gt"tes  an^ 
notes  would  not  discharge  the  bank.  Nor  was  the  f^'^^'sn  coin, 
contract  to  return  in  specie  varied  by  showing  that  the  de- 
positor had  subsequently  drawn  checks  which  had  been  paid 
in  legal  tender  notes,  it  also  appearing  that  he  had  never, 
since  making  the  deposit,  had  a  less  balance  than  §i)3,000 
to  his  credit  in  the  bank.i  g^t  the  purport  of  Thompson  v. 
Riggs^  seems  to  be  contrary  to  this.  The  court  there  regard 
the  entry  of  the  word  "  Coin "  as  a  mere  memorandum,  and 
decline  to  admit  evidence  of  a  usage  of  bankers  to  regard 
it  as  constituting  a  contract  to  repay  in  coin.  The  opinion 
is  unfortunately  obscure,  but  such  seems  to  be  its  import. 
These  cases  do  not  turn  so  much  upon  the  point  of  special 
deposit  as  of  a  coin  contract,  so  called. 

On  principle,  it  would  seem  that  it  would  be  always  proper 
and  legitimate  to  draw  a  distinction,  for  various  purposes,  be- 
tween coin  of  the  United  States  and  coin  of  a  foreign  coun- 
try, which  has  not  been  adopted  into  ordinary  daily  currency 
among  the  people  of  the  United  States.  If  a  deposit  of  the 
former  be  made  in  ordinary  times,  when  coin  is  at  par,  it  must 
be  taken  as  a  general  deposit  unless  otherwise  explained.  But 
if  a  deposit  of  the  latter  be  made,  it  should  be  taken  as  a  spe- 

'^  Dawson  t'.  Real  Estate  Bank,  5  Ark.  299. 

1  §  184.  Chesapeake  Bank  v.  Swain,  29  Md.  483. 

2  5  Wall.  663. 

381 


§  185  KINDS    OF    DEPOSIT. 

cial  deposit,  in  the  absence  of  express  understanding.  For  it 
is  not  properly  a  payment.  Payment,  except  by  agreement  of 
parties,  could  not  be  made  in  such  material.  The  bank  cannot, 
practically  at  least,  pay  it  out  again  to  its  customers ;  it  can- 
not use  it  for  meeting  the  checks  of  depositors,  not  even  of  the 
very  party  depositing  it,  if  it  be  in  fact  a  general  deposit.  In 
short,  foreign  coin  is,  in  the  United  States,  so  far  in  the  nature 
of  a  commodity  that  it  cannot  pass  either  to  or  from  a  banker 
ns  money  unless  by  force  of  an  agreement  between  the  parties, 
either  express  or  to  be  implied  from  their  usual  course  of  deal- 
ing together.  So  if  it  should  be  the  case  that  the  present  or 
any  future  Legal  Tender  Act  should  make  it  sufficient  for  a 
bank  to  return  in  treasury  notes  the  nominal  sum  Avhich  it 
has  received  in  gold  coin  of  the  United  States,  it  yet  would  not 
follow  that  a  similar  return  of  the  nominal  value  of  foreign 
coin  would  be,  as  a  matter  of  logical  necessity,  equally  legiti- 
mate. The  coin  and  the  notes  of  the  United  States  are  both 
currency  of  the  United  States,  and  the  law  simply  refuses  to 
recognize  any  distinction  or  dilTerencc  between  them.  But  the 
foreign  coin  is  different  from  both  these  kinds  of  currency; 
even  if  it  were  to  be  replaced  by  gold  coin  of  the  United  States, 
still  its  value,  in  the  shape  of  exchange,  would  be  credited  or 
debited  in  making  up  the  judgment.  None  the  less  should  its 
value  be  estimated  in  the  usual  currency  of  the  country,  which 
is  legal  tender,  and  is  the  only  money  practically  in  use.  Fur- 
ther, it  certainly  seems  to  us  that  both  law  and  justice  would 
sustain  the  rule,  that  where  gold  is  practically  a  commodity 
even  when  in  the  shape  of  coin,  when  it  has  ceased  to  circu- 
late and  to  be  transferred  from  man  to  man  as  current  money, 
then  a  deposit  in  it  should  no  longer  be  regarded  as  presum- 
ably a  deposit  of  so  many  dollars,  returnable  in  paper  of 
nmch  less  ix'al  value,  but  should  be  considered  iirima  facie 
a  special  deposit,  as  much  as  gold  dust  or  jewels  in  ordinary 
times. 

§  185.    Specific  Deposit.  —  When  money  is  deposited  to  pay 

a  specified  check  drawn  or  to  be  drawn,  or  for  any  purpose 

other  than  mere  safe  keeping,  or  entry  on  general  account, 

it  is  a  specific  deposit,  and  the  title  remains  in  the  depositor 

382 


SPECIFIC    DEPOSIT.  §  186 

until  the  bank  pays  the  person  for  whom  it  is  intended,  or 
promises  to  pay  it  to  him.^ 

A  deposit  of  money  to  pay  a  specified  note,  or  of  a  bill  to 
be  collected,  or  of  paper  or  goods  as  collateral  security,  or  of 
bonds  in  order  that  the  bank  may  act  as  agent  to  collect  the 
interest  for  the  owner,  is  a  specific  deposit. 

When  a  collection  has  been  made,  the  proceeds  may  be 
credited  on  general  account  and  so  become  a  general  deposit, 
or  may  be  kept  separate  as  a  special  deposit,  at  the  proceeds  of 
option  of  the  bank  ;  except  in  Wisconsin,  where  a  <=oi^ection. 
bank  is  held  to  have  no  right  to  treat  the  proceeds  of  a  col- 
lection as  its  own  money,  but  must  treat  it  as  trust  money  in 
all  cases ;  and  except  where  the  person  for  whom  the  collec- 
tion was  made  ordered  the  bank  "  to  collect  and  remit,"  this 
direction  negativing  the  right  to  credit  the  proceeds  on  gen- 
eral account. 

§  186.  A  Deposit  is  presumed  to  be  General.  —  "  A  deposit  is 
general  unless  expressly  made  special "  or  specific. ^ 

Or  the  circumstances  are  such  as  to  imply  that  the  deposit 
is  not  meant  to  be  general,  as  where  money  is  deposited  en- 
closed in  a  box  or  bag,  or  sealed  up.^ 

Wherever  the  bank  h^s  a  right  to  mingle  the  funds  depos- 
ited with  its  own  and  treat  them  as  a  debt  due  from  it,  even 
though  the  money  may  be  trust  property  given  to  Trust 
the  bank  on  condition  that  it  would  pay  a  certain  i"°"«y- 
sum  to  the  cestui  during  life,  the  deposit  is  general.^  In  the 
absence  of  evidence  to  show  that  it  is  the  bank's  duty,  by 
agreement  express  or  clearly  implied,  to  keep  the  funds  and 
their  investment  separate,  it  must  be  treated  as  a  general 
deposit. 

1  §  185.  Mayer  v.  Chattahoochee  National  Bank,  51  Ga.  325;  Wharton 
V.  Walker,  4  Barn.  &  C.  163;  Cobb  v.  Beeke,  6  Q.  B.  930;  Owen  v. 
Bo  wen,  5  Car.  &  P.  93,  96. 

1  §  186.  Ward  v.  Johnson,  95  111.  215;  2  111.  App.  261;  Brahm  v. 
Adkins,  77  111.  263;  Neely  v.  Rood,  54  Mich.  134;  Ruffin  v.  Commis- 
sioners, 69  N.  C.  498;  In  re  Franklin  Bank,  1  Paige,  249. 

^  Dawson  v.  Real  Estate  Bank,  5  Ark.  297. 

3  Vail  V.  Newark  Savings  Inst.,  32  N.  J.  Eq.  627  (1880). 

383 


§  187  KINDS   OF    DEPOSIT. 

(a)  The  addition  of  the  word  "  clerk  "  to  the  name  of  the 
depositor  does  not  change  it  from  a  general  to  a 
special  deposit,  or  alter  the  liability  of  the  bank.* 

A  deposit  by  a  clerk  of  a  court  under  its  order,  and  not  kept 
Public  de-  separate  from  the  other  funds  of  the  bank,  is  gen- 
posit.  pj.,^1^  ,^,jj  ^ijy  clerk  is  not  preferred  to  other  creditors 
of  the  bank  in  case  of  its  failure.^ 

{h)  Where  F.  sent  a  check  with  the  instruction,  "  Credit 
onr  account,  and  charge  us  our  note  due  the  4tli  inst.,"  and  the 
Not  a  specific  chcck  was  collected,  credited,  and  a  matured  note 
fteditefon  of  F.'s  payable  at  the  bank  was  paid  on  the  3d, 
counMhoiigh  leaving  insufficient  funds  to  pay  the  one  presented 
a  specific  di-    qj^  ^]^q  ^^\^  [^  ^yas  held  that  this  was  not  a  specific 

rection  be  '  /-,       i 

added.  deposit.     The  direction   to  "Credit  our  account 

made  it  a  general  deposit,  (and  the  second  clause  was  super- 
erogation, as  the  bank  would  have  authority  to  pay  the  note 
of  the  4th  any  way,)  and  the  bank  from  the  time  of  cred- 
iting the  sum  on  general  account  held  it  subject  to  checks  or 
notes  in  the  order  of  presentment.*^ 

Perhaps  the  decision  was  very  just  under  all  the  circum- 
stances, but  if  the  substance  is  to  bo  looked  to  rather  than 
hair-line  distinctions,  it  would  seem  that  the  language  used 
by  the  depositor  as  clearly  indicated  his  intent  to  apply  the 
money  sent  toward  payment  of  the  note  of  the  4th,  as  though 
he  had  said,  "  We  send  this  check  to  pay  our  note  of  the  4tli 
inst.,"  in  which  case  there  would  have  been  no  doubt  that  the 
bank  could  use  the  money  for  that  purpose  only.  It  has  often 
been  held  that  any  specific  directions  regarding  the  payment 
of  a  note,  or  ajipropriation  of  a  deposit,  must  be  regarded." 

§187.  Deposit  of  Paper.  —  When  checks,  notes,  or  other 
negotiable  pa{)cr  are  deposited,  the  question  whether  they  con- 
stitute a  general  deposit  or  a  specific  deposit  for  collection  is 
one  of  some  difficulty.     The  best  opinion  is,  that  checks  on 

*  McLain  v.  Wallace,  103  Tnd.  .562  (1885). 
8  Otis  V.  Gross,  9G  111.  (512  (1880). 

6  ^tna  National  Bank  v.  Fourth  National  Bank,  46  N.  Y.  82. 
'  Judy  V.  Farmers  &  Traders'  Bank,  81  Mo.  404;  Wilson  i'.  Dawson, 
52  Ind.  513;  Egerton  v.  Fulton  National  Bank,  43  How.  Pr.  216. 
384 


DEPOSIT   OF   PAPER.  §  188 

the  depositary  credited  as  cash  form  a  general  deposit,  in  the 
absence  of  agreement  or  usage  to  the  contrary,  and  that  other 
paper  credited  as  cash  is  also  received  on  general  deposit,  sub- 
ject to  the  right  of  the  bank  to  cancel  the  credit  if  the  paper 
is  dishonored  without  its  fault  (there  is  disagreement  on  this 
point).  If  paper  is  credited  as  paper,  it  is  received  as  a  spe- 
cific deposit  for  collection.  This  subject  is  discussed  under 
the  head  of  "  Title  to  Deposits,"  §  565.  If  the  title  passes 
to  the  bank,  a  general  deposit  arises ;  if  not,  a  specific  or  spe- 
cial one,  according  as  the  bank  is  merely  to  keep  and  return 
tlie  identical  paper,  or  is  to  do  some  further  act  in  respect 
to  it. 

§  188.  Change  of  Deposit  from  One  Kind  to  Another.  —  By 
agreement  or  order,  a  special  deposit  may  be  changed  into  a 
general  or  specific  deposit,  or  a  general  into  a  specific  or  spe- 
cial ;  or  a  specific  deposit  may  become  a  special  or  a  general 
deposit,  as  when  paper  is  collected,  and  the  bank  credits  the 
proceeds  to  the  depositor  on  general  account.^ 

Where  a  bank  paid  money  for  C.  under  agreement  that  C. 
would  apply  his  balance  on  the  consequent  debt  to  the  bank, 
and  give  his  note,  which  he  did,  it  was  held  that  this  appro- 
priation of  the  deposit  put  it  out  of  the  reach  of  C.  by  check- 
ing, or  of  his  creditors  by  attachment,  and  on  failure  of  the 
bank  it  should  be  deducted  from  the  amount  of  the  claim  on 
the  note  against  C.^ 

So  when  a  depositor  (D.)  orders  his  bank  (A.)  to  remit 
money  for  him  to  another  bank  (B.),  A. acts  as  agent  in  trans- 
mitting ;  and  as  soon  as  the  money  on  deposit  in  A.  is  appro- 
priated by  it  on  the  order,  it  becomes  a  specific  deposit  as  to 
A.,  the  title  being  in  D.,  and  although  A.  deposits  the  money 
in  B.  to  its  own  credit,  the  fund  may  be  claimed  by  D.  against 
the  creditors  of  A.  upon  its  insolvency.^ 

1  §  18S.  Howard  r.  Roeben,  ."3  Cal.  3^0  (special  to  jreneral) :  Com. 
National  Bank  c.  Henninger,  105  Pa.  St.  500  (general  to  special  or  spe- 
cific);  Chiles  V.  Garrison,  .32  Mo.  475. 

2  Chase  v.  Petroleum  Bank,  60  Pa.  St.  169. 

3  St.  Louis  V.  Johnson,  5  Dill.  241;  Farley  v.  Turner,  26  L.  J.  x.  s. 
710. 

VOL.  I.  25  385 


CHAPTER   XIV. 

SPECIAL   DEPOSIT. 

§  189.  Analysis. 

§  190.  Definition.    §§  182,  183. 

§  182.  How  distinguished  from  general  and  specific  deposits. 

§  191.  PowKK.    §  48. 

,  Bank  has   inherent   power   to  receive.     (Doubted  in  New 

York.) 
§  192.  Anything  may  be  deposited  specially  that  the  bank  chooses  to 

receive,  and  the  identical  thing  deposited,  together  with 
§  193.  its  accumulations,  and  all  profits  arising  from  it,  must  be 

§  204.  returned  to  the  depositor,  or  to  one  properly  authorized 

§  194.  to  receive  it,  and  if  the  bank  is  lacking  in   due   care, 

§  202.  whereby  the  deposit  is  lost,  damaged,  or  delivered  to  an 

§  204.  improper  person,  it  is  liable  to  the  depositor.     §§  184,  565, 

567,  568  b. 
§  194.  The  Measure  op  Care  a  bank  must  bestow  in  case  of  a  special 

deposit  is  the  subject  of  conflict. 
§§  194,  195.  The  best  rule  is  that  a  bank  is  bound  to  ordinary  care,  and 

no  more. 
§§  198,  199.  Sometimes  it  is  said  that  only  gross  negligence  equivalent 

K  19(5.  to  fraud  will  make  the  bank  liable,  and  that  if  it  gives 

the  same  care  as  to  its  own  bank  property  no  fault  can 
be  imputed. 
§  194.  Sometimes  gross  negligence  is  taken  as  the  standard,  and 

(2)  defined  as  the  lack  of  even  so  much  care  as  the  most 
inattentive  person  of  common  sense  exercises  in  his  own 
affairs. 
§  197.  And,  again,  gross  negligence  is  nominally  accepted  as  the 

test,  but  the  court  defines  it  as  lack  of  ordinary  care. 
§§  195,  199.        Some  Things  seem  Certain  amid  the  confusion. 

(a)  A  bank  is  not  liable  for  a  special  deposit  stolen  without  its 
fault. 
§§201,202,204.  (b)  Nor  for  a  loss  by  the  wilful  act  of  an  officer  beyond  the 

sphere  of  his  duty.     §  102  e,  h. 
§  196  et  seq.  Bad  faith,  or  less  care  than  the  bank  takes  of  its  own  like 

property  will  everywhere  make  it  liable. 
§  200.  No  more  than  ordinary  care  is  ever  required  unless  a 

§  203.  Special  Agreement  is  entered  into  by  the  bank,  which  may 

enlarge  its  contract. 
§  20-3.  Unauthorized  representations  of  an  officer,  unknown  to  the 

directors,  cannot  enlarge  the  contract. 

386 


SPECIAL  DEPOSIT.  §  191 

§  190.  Definition. — A  special  deposit,  so  called,  is  the  pla- 
cing of  soiuething  in  the  charge  or  custody  of  the  bank,  of 
which  specific  thing  restitution  must  be  made.^  Or  the 
phrase  may  be  applied  to  the  thing  deposited. 

§  191.  Power.  (See  §  48.)  —  It  has  generally  been  consid- 
ered that  taking  a  special  deposit  falls  within  the  general  scope 
of  the  banking  business,  although  no  express  power  is  con- 
ferred by  the  charter  of  the  bank,  or  by  the  organic  law,  so  to 
do.  It  has  been  regarded  as  an  incident  to  the  general  func- 
tions of  the  institution.^ 

But  the  power  of  the  bank  to  make  contracts  of  bailment  of 
this  nature  has  been  questioned  in  some  cases.  Whetlier  the 
receipt  of  goods  and  securities  on  deposit  for  safe  keeping  is 
within  the  implied  powers  of  national  banks  organized  under 
the  Act  of  Congress  of  1864,  c.  106,  is  a  qucere  by  the  New 
York  Court  of  Appeals.  But  it  is  said  to  be  certain  that 
such  a  function  is  not  ordinarily  or  necessarily  appurtenant 
to  or  a  part  of  the  general  banking  business  which  such  asso- 
ciations are  authorized  by  their  organic  law  to  conduct;  that 
accordingly  the  cashier  has  no  power  to  enter  into  such  a 
contract  of  bailment  with  any  person  on  behalf  of  the  bank 
without  some  special  authority ;  that  in  the  absence  of  proof 
that  the  cashier  had  received  such  authority  from  the  direc- 
tors, or  that  they  had  ever  sanctioned  or  had  knowledge  of 
such  contract,  or  that  it  was  the  habit  of  the  bank  to  enter 
into  such  undertakings,  or  that  other  national  banks  were 
accustomed  to  receive  deposits  of  like  character  under  like 
circumstances,  it  was  unquestionable  that  the  authority  so  to 
contract  did  not  reside  in  the  cashier,  and  such  a  contract, 
made  by  him,  was  ultra  vires.^     The  bank  receiving  such  an 

1  §  190.  Dawson  v.  Real  Estate  Bank,  5  Pike,  283;  Story  on  Bail- 
ments, §  88;  Keene  v.  Collier,  1  Met.  Ky.  417;  State  v.  Clarke,  4  lud. 
316. 

^  §  191.  Foster  v.  Essex  Bank,  17  Mass.  479;  Marine  Bank  of  Chicago 
I'.  Chandler,  27  111.  525;  Scott  v.  National  Bank  of  Chester  Valley,  72 
Pa.  St.  471;  Lancaster  Bank  v.'  Smith,  12  P.  F.  Smith,  54;  Caldwell  v. 
National  Mohawk  Valley  Bank,  64  Barb.  333. 

2  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278;  Wiley 
r.  First  National  Bank  of  Brattleboro,  47  Vt.  546;  Lloyd  v.  West  Branch 

387 


§  192  SPECIAL   DEPOSIT. 

unauthorized  bailment,  being  at  best  a  mere  gratuitous  bailee, 
is  liable  only  for  gross  negligence.^ 

It  has  been  said  that,  though  the  act  of  the  cashier  in  re- 
ceiving special  deposits  cannot  alone  bind  the  bank,  jet  if  the 
directors  have  knowledge  of  his  action  in  this  respect,  and  do 
not  interfere  or  object  to  it,  or  if  it  is  the  established  custom 
of  the  bank,  then  the  bank  will  be  bound  by  the  cashier's 
receipt  of  the  jjroperty.* 

§  192.  What  may  be  deposited  Specially. — Anything  what- 
ever, which  the  bank  may  C(jnsent  to  receive  in  charge,  may 
be  the  subject  of  a  special  deposit.  Ordinarily,  a  deposit  of 
money,  at  least  if  it  be  the  current  money  of  the  country  or 
State  where  the  deposit  is  made,  will  be  assumed  to  be  a  gen- 
eral deposit,  unless  the  contrary  is  at  the  time  directly  noti- 
fied, or  in  some  shape  distinctly  implied,  so  that  the  bank 
could  not  reasonably  misunderstand  the  depositor's  intent. 
Thus,  if  a  "sealed  packet,  bag,  box,  or  chest"  be  deposited, 
though  it  contain  ordinary  current  money,  yet  the  manner 
and  condition  of  the  delivery  shall  suffice  to  inform  the  bank 
that  the  deposit  is  designed  to  be  special,  and  not  general. 
Neither  does  it  matter  what  may  be  the  actual  value  of  the 
property  deposited,  or  what  that  value  may  become  during 
the  period  of  deposit. 

If  bills  or  notes  be  deposited  which  are  partially  depre- 
ciated, and  which  continue  to  depreciate  even  to  the  point 
of  worthlessness,  yet  the  bank  is  still  bound  to  restore  them 
specifically  to  the  depositor,  whose  rights  of  ownership  are 
not  affected  by  the  value  of  the  projierty.^  These  cases  show 
that  it  has  been  thus  held,  even  where  the  deposit  was  of 
"  Confederate  money,"  and  of  the  so-called  "  Cotton  money," 
current  in  the  revolted  States  during  our  last  war.     The  ille- 

Bank,  15  Pa.  St.  172.  But  see  Turner  v.  First  National  Bank  of  Keokuk, 
20  Iowa,  562,  which,  by  implication,  would  sustain  a  contrary  view, 
since  it  seems  to  recognize  a  claim  for  a  special  deposit  as  a  debt  of  the 
bank. 

8  First  National  Dank  v.  Ocean  National  Bank,  60  N.  Y.  278. 

*  First  National  Bank  v.  Graham,  79  Pa.  St.  106. 

1  §  192.  Dawson  r.  Real  Estate  Bank,  5  Pike,  283;  Green  v.  Sizer,  40 
Miss.  530.     And  see  Maynard  v.  Newman,  1  Nev.  271. 

388 


THE  PROFITS  BELONG  TO  DEPOSITOR.        §  193 

gality  and  wrongfulness  attendant  upon  the  original  issue 
and  subsequent  using  of  such  money  was  not  sullicicnt  ex- 
cuse to  exonerate  the  bank  from  returning  a  special  deposit 
of  it  in  specie.  But  other  cases  are  to  a  contrary  purport 
upon  this  precise  point.^ 

§  193.  The  very  Thing  and  its  Accumulations  or  Profits  must 
beVeturned.  — After  the  passage  of  the  Legal  Tender  Acts, 
so  called,  it  was  held,  in  Pennsylvania  and  Louisiana,  that  a 
deposit  of  so  much  gold  coin,  for  which  a  certificate  of  deposit 
was  returned,  could  yet  be  repaid  in  treasury  notes.^  It  was 
regarded  as  a  general  deposit  of  money,  not  as  a  special  de- 
posit of  specific  coins.  In  Wisconsin  it  was  less  justifiably 
held  that  a  deposit  of  coin  as  collateral  for  a  loan  —  which 
is,  in  fact,  at  least  for  the  purposes  involved  in  this  discus- 
sion, a  special  deposit  of  that  coin — could  be  discharged 
by  the  return  of  the  same  nominal  amount  in  the  legal 
tender  treasury  notes  of  the  United  States.^  In  Indiana  it 
was  properly  held,  on  the  contrary,  that  where  a  special 
deposit  of  gold  coin,  partly  of  the  United  States  and  partly 
foreign,  had  been  converted  by  the  bailee,  the  bailor  should 
be  allowed  to  recover  the  real  value  of  the  amount  in  the 
treasury  notes,  as  contradistinguished  from  the  nominally 
equivalent  sum.^  The  bailee  must  deliver  to  the  bailor  the 
profit  accruing  from  the  special  deposit.''  No  difference  is 
recognized  between  a  bank  note  and  gold  coin  in  payment  of 
a  debt,  but  when  a  bailee  of  specific  coin  has,  in  violation 
of  his  duty,  sold  it  for  a  premium,  he  cannot  hold  the  profit 
and  pay  the  bailor  in  bank  notes  equal  nominally  to  the 
coin.  No  one  has  a  right  to  make  a  profit  by  violation  of 
his  legal  duty,  and  the  law  will  not  allow  him  to  retain  it 
if  he  has.^ 

2  See,  contra,  Nelligan  v.  Citizens'  Bank  of  Louisiana,  21  La.  An.  332; 
Foster  v.  Bank  of  New  Orleans,  id.  338. 

1  §  193.  Sandford  v.  Hays,  52  Pa.  St.  26;  Gumbel  v.  Abrams,  20  La. 
An.  568;  and  see  Thompson  v.  Riggs,  5  Wall.  663. 

2  Warner  v.  Sauk  County  Bank,  20  Wis.  492. 
'  Bank  of  the  State  v.  Burton,  27  Ind.  426. 

*  Story  on  Bailment,  §§  122,  123,  269. 

5  Bank  of  the  State  r.  Burton,  27  Ind.  426. 

389 


§  194  SPECIAL   DEPOSIT. 

§  194.  Liability  of  the  Bank  for  a  Special  Deposit.  —  General 
Review  of  the  Subject.  —  As  to  the  measure  of  responsibility 
of  the  bank  in  the  case  of  a  special  deposit,  a  decision  may  be 
found  for  any  desired  standard. 

(1)  Some  cases  say  that  the  bank  as  a  gratuitous  bailee  is 
only  bound  to  such  care  as  is  consistent  with  good  faith,  hold- 
Gross  negii-  ing  that  gross  negligence  and  fraud  are  one  and 
bTfraud.  the  same,  and  that  it  is  sufficient  if  the  bailee  ex- 
ercises the  same  care  of  the  deposit  as  of  his  own  like  goods.^ 
The  vast  weight  of  authority  is  against  this.^ 

(2)  Other  cases  hold  that  gross  negligence  is  the  test,  and 
that  there  is  a  shade  of  difference  between  gross  negligence 
Gross  nepii-  aud  fraud :  a  man  might  leave  a  purse  of  gold  on 
sHght  ca'ie."  tlic  table  of  a  hotel,  and  although  it  would  be  gross 
carelessness  it  would  not  be  fraud.  These  cases  define  gross 
negligence  to  be  lack  of  such  care  as  the  least  attentive  per- 
sons of  common  sense  take  of  their  own  afl'airs.^  The  bank, 
as  a  gratuitous  bailee,  is  liable  only  for  gross  negligence,  and 
for  the  lack  of  that  "  care  which  the  most  inattentive  persons 
take."* 

(3)  Again  it  is  held  that  a  bank  is  only  responsible  as  gra- 
tuitous bailee  for  gross  negligence,  but  that  gross  negligence 
Gross  negii-  IS  lack  of  ordinary  care.^  Such  a  ruling,  though 
ha-k  of'ordi-  doing  justicc  betwccn  the  parties,  introduces  confu- 
nary  care.  giQ^  jj^to  thc  standards  of  the  law  by  confounding 
negligence  and  gross  negligence.  There  are  three  degrees  of 
diligence,  —  great,  ordinary,  and  slight ;  —  and  three  corre- 
sponding degrees  of  negligence,  —  slight  negligence,  or  lack 
only  of  great  care  ;  simple  negligence,  or  lack  of  ordinary  care, 
but  above  slight  care ;  and  gross  negligence,  or  lack  even  of 
slight  care,  or  such  as  persons  of  common  sense,  but  very 
little  prudence,  take  of  their  own  concerns. 

^  §  194.  Essex  Bank  case  below,  and  Jones  on  Bailment,  10,  40,  119. 
2  Story  on  Bailment,  §  22. 

8  Vaughn  v.  Menlove,  3  Bing.  N.  C.  408;  Tomkins  v.  Saltmarsh,  14 
Serg.  &  R.  275. 

4  De  Haven  v.  Kensington  National  Bank,  81  Pa.  St.  95. 

5  First  National  Bank  v.  Ocean  National  Bank,  GO  N.  Y.  295. 

390 


LIABILITY   OP   BANK.  "  §  194 

(4)  The  true  rule  seems  to  be  that  in  the  absence  of  special 
ao-rcement  the  bank  is  bound  to  exercise  ordinary   The  true 
care,  and  no  more,  m  keeping  a  special  deposit."         nan-  care. 

Loss  caused  by  the  negligence  of  A.  should  be  borne  by  A. ; 
the  development  of  prudence  and  the  repression  of  negligence 
is  consciously  or  unconsciously  one  of  the  great  objects  of  the 
law ;  and  whether  for  reward  or  not  one  undertakes  to  do  a 
certain  thing,  he  should  be  held  to  ordinary  care  in  doing  it, 
except  in  special  cases,  just  as  every  man  is  held  responsible  to 
others  for  loss  caused  to  them  by  lack  of  ordinary  care  on  his 
part  in  the  conduct  of  his  own  affairs,  even  where  there  is  no 
relation  of  contract  at  all ;  otherwise  the  risk  would  be  run  of 
throwing  loss  upon  prudence  rather  than  imprudence,  and  de- 
veloping and  sending  down  to  future  generations  qualities 
detrimental  to  social  life,  thus  failing  to  carry  out  the  mis- 
sion of  the  law,  the  purifying  of  the  blood  of  society. 

It  is  a  question  of  negligence  between  the  bailor  and  bailee. 
If  the  bailor  knows  the  character  of  a  man,  and  gets  him  as  a 
favor  to  keep  goods  for  the  bailor,  the  latter  may  well  be  held 
to  be  entitled  to  expect  only  such  care  as  he  knows  the  bailee 
is  in  the  habit  of  giving  to  his  own  affairs.  Or  if  A.  ui'ges  B. 
to  act  as  a  gratuitous  bailee,  B.  not  holding  himself  out  in 
such  a  character,  it  might  be  argued  that  A.  should  be  held  to 
adopt  B,  as  he  is,  much  as  he  would  adopt  a  shovel  or  a  steam- 
engine,  within  the  limits  of  good  faith,  though  it  is  by  no 
means  certain  that  in  any  case  where  B.  consents  to  act  and 
A,  is  ignorant  of  his  character  there  should  be  any  yielding 
of  the  rule  requiring  ordinary  care.  But  ivhen  B.  holds  him- 
self out  as  willing  to  keep  deposits,  and  as  having  facilities  for 
that  purpose,  surely  A  cannot  be  negligent  in  taking  advan- 
tage of  the  offer ;  and  if  B.  should  be  negligent  and  loss  follow, 
the  detrimental  conduct  from  which  such  loss  flows  is  clearly 
B.'s  alone,  and  he  should  suffer.  Even  if  the  question  of  con- 
sideration is  considered  of  importance,  it  cannot  be  doubted 
that  an  institution  whose  avowed  object  is  money  making 
would  never  pursue  the  business  of  receiving  deposits  if  it  did 
not  consider  such  dealings  advantageous  to  itself.     The  draw- 

6  First  National  Bank  v.  Zent,  39  Ohio  St.  103. 

391 


§  I'Jb  SPECIAL   DEPOSIT. 

ing  of  paying  business  by  this  sort  of  accommodation  is  as 
solid  a  reason  for  receiving  deposits  as  a  direct  reward ; 
moreover  the  mere  entering  upon  any  trust  is  deemed  in  the 
law  a  sufficient  consideration  for  the  contract  to  perform  the 
duties  of  the  trust  in  a  ])roper  manner.     See  §  215. 

(5)  On  the  cases  only  two  things  seem  to  be  certain  in  this 
matter.  1st.  The  bank  will  be  everywhere  held  liable  for  loss 
Two  things     arising  from  bad  faith  of  its  officers  in  the  sphere 

oirtain  ou  the      n     ^     •      i      •  niii        i 

cases.  01  their  duties,     zd.  A  bank  will  nowhere  be  held 

to  more  than  ordinary  diligence  in  respect  to  a  special  deposit, 
nor  for  a  theft  or  other  wilful  act  of  an  officer  out  of  the  line 
of  his  employment. 

These  are  the  limits.  Within  them  the  States  range  in 
procession. 

§  195.  Cases  upon  the  Bank's  Liability  for  Special  De- 
posits. —  A  I'eeent  New  York  case  contains  a  very  elaborate 
discussion  concerning  the  liability  of  banks  for  special  depos- 
Speciai  de-  ^^^  which  are  stolen  while  in  their  custody.  The 
posit  stolen,  dcposit  in  this  instance  consisted  of  a  parcel  of 
lor  its  gross  bonds,  left  with  the  teller.  They  were  put  into  the 
negligence.  ^^^^  whcrc  the  bank's  own  securities  were  kept ; 
but  the  safe  was  accessible  to  any  person  entering  the  bank  ; 
the  safe  door  was  sometimes  left  open  ;  and  the  interior  of 
the  safe  was  not  always  within  view  of  any  oflicer  of  the  bank. 
There  was  evidence  to  show  that  the  theft  probably  took 
place  in  the  daytime  by  some  one  coming  in  from  the  street. 
The  evidence  justified  the  finding  of  gross  negligence.  Prop- 
erty of  the  bank  also  was  stolen  at  the  same  time.  But  the 
court  said  that  this  was  not  conclusive  that  the  bank  was  not 
guilty  of  gross  negligence,  and  consequently  liable.^ 

§  196.  Banks  frequently  receive  special  dei)Osits  from  their 
customers  gratuitously,  accepting  no  pay  and  deriving  no  bene- 
fit from  the  act,  which  is  done  solely  for  the  depositor's  ac- 
commodation. Assuming  that  the  bank  has  authority  to  enter 
into  such  an  undertaking,  it  is  at  best  a  naked  bailment,  and 
the  bank  is  bound  only  to  keep  the  property  with  the  same 
care  with  which  it  keeps  its  own  property  of  the  like  descrip- 

1  §  195.  Pattison  v.  Syracuse  National  Bank,  80  X.  Y.  94. 
392 


LIABILITY   OF   BANK. — BAD    FAITH    TEST.  §196 

tion.     It  is  responsible  only  for  gross  negligence,  like  any 
other  bailee  without  reward.^     It  need  keep  no  further  super- 
vision over  the  officers  who  have  direct  charge  and  control  of 
it  than  it  keeps  over  the  same  officers  having  the  same  charge 
and  control  of  its  own  property  of  the  same  kind.^     So  if  the 
property  be  placed  in  the  vaults  of  the  bank,  together  with  its 
own  similar  property,  and  be  thence  stolen  by  the  oflicer  who 
has  charge  of  the  vaults,  the  bank  is  not  liable  to  the  deposi- 
tor.    "  The  bailee  will  be  answerable  only  for  gross  negligence, 
ivliich  is  considered  equivalent  to  a  breach  of  faith  ;  as  every 
one  who  receives  the  goods  of  another  in  deposit   ^^^^^  ^^_ 
impliedly  stijuilates  that  he  will  take  some  degree   g'^*j|=|  jj^^^^^-^ 
of  care  of  them.     The  degree  of  care  which  is  neces-  care  tiie  de- 
sarg  to  avoid  the  imputation  oj  bad  jaith  is  meas-   takes  of  his 
ured  by  the  carefulness  ivhich  the  depositary  uses   ^^^"S^o 
toward  his  own  property  of  a  similar  kind.     For  although  that 
may  be  so  slight  as  to  amount  even  to  carelessness  in  another, 
yet  the  depositor  has  no  reason  to  expect  a  change  of  char- 
acter in  favor  of  his  particular  interest ;   and  it  is  his  own 
folly  to  trust  one  who  is  not  able  or  willing  to  superintend 
with  diligence  his  own  concerns."     In  this  case  the  special 
deposit  was  a  cask  containing  gold  coin,  which  was    „     .  ,  , 

"  "  Special  de- 

f raudulently  taken  by  the  cashier  and  clerk  of  the  posit  act  ont- 
bank.  The  bank  was  declared  not  liable,  because 
the  theft  was  a  private  act.  "  If  the  cashier  had  any  official 
duty  to  perform  relating  to  the  subject,"  said  the  court,  "  it 
was  merely  to  close  the  doors  of  the  vault  when  banking  hours 
were  over,  that  this,  together  with  other  property  there  should 
be  secure  from  theft.  He  cannot,  therefore,  be  considered  in 
any  view  as  acting  within  the  scope  of  his  employment  when 
he  committed  the  villany ;  and  the  bank  is  no  more  answera- 
ble for  this  act  of  his  than  it  would  be  if  he  had  stolen  the 
pocket-book  of  any  person  who  might  liave  laid  it  upon  the 
desk  while  he  was  transacting  some  business  at  the  bank."  ^ 

1  §  196.  Chattahoochee  National  Bank  v.  Schley,  58  Ga.  369. 

2  First  National  Bank  v.  Ocean  National  Bank,  60  N.  Y.  278. 

'  Foster  r.  Essex  Bank,   17  Mass.  479;    Scott  v.   National  Bank  of 
Chester  Valley,  72  Pa.  St.  471;  but  see  Leach  v.  Hale,  31  Iowa,  69. 

393 


§  197  SPECIAL  DEPOSIT. 

§  lOT.    Gross  Negligence    ''is   inc;ii)al)lc    of   precise   dcfini- 

*  tioii,  and  its  ajtplicatiou  and  use  may  lead,  in  some  cases,  to 

results  unsatisfactory  ;  hut  that  comes  as  directly  from   the 

nature   and  extent   of    the   dutv   in    the  i)articular 

Gross  iie^rlect  i  •'  i 

as  to  special  case,  as  from  the  phrase  by  whicli  a  breach  oi  the 
laXofordi-^  duty  is  expressed.  What  constitutes  gross  negli- 
nary  care.  ggncc,  that  IS,  such  Want  of  carc  as  would  charge  a 
bailee  for  loss,  must  depend  very  much  upon  the  circum- 
stances to  which  the  term  is  to  be  applied.  It  has  been  de- 
fined to  be  the  want  of  that  ordinary  diligence  and  care  which 
a  usually  prudent  man  takes  of  his  own  property  of  the  like 
description.  Tliis  definition  is  given  by  a  reference  to  the  de- 
gree of  care,  rather  than  the  degree  of  negligence,  which  may 
be  the  easier  and  more  intelligible  mode  of  defining  the  extent 
of  the  obligation,  and  the  measure  of  duty  assumed.  Ordinary 
care  as  ivell  as  gross  yiegligence,  the  one  hehig  in  contrast  with 
the  other^  must  be  graded  by  the  nature  and  value  of  the  prop- 
erty, and  the  risks  to  which  it  is  exposed.  A  depositor  of 
goods  or  securities  for  safe  keeping  with  a  gratuitous  bailee, 
can  only  claim  that  diligence  which  a  person  of  common 
sense,  not  a  specialist  or  expert  in  a  particular  department, 
should  exercise  in  such  department."  ^ 

"  Independent  acts  of  negligence,  disconnected  with  the 
loss,  were  not  properly  admissible  in  evidence.  The  defend- 
ant was  not  chargeable  with  negligence  or  want  of  care  for 
not  acting  upon  facts  or  circumstances  not  coming  to  the 
knowledge  of  its  directors  or  officers.  Facts  not  brought 
home  to  them,  tending  to  show  that  the  property  was  exposed 
to  loss  from  some  unusual  cause,  to  some  peril  growing  out 
of  peculiar  circumstances,  were  not  admissible  in  evidence 
„    ,     ,        against  the  defendant.     The  bailee  was  only  called 

Bank  not  "^  "^ 

bound  to  pro-  upou  to  take  such  care  as  became  necessary  to  pro- 
vide a<;ainst  ,  ,  .77  •  jy       f    i     u    i     i 

nnknown        tcct  it  against  risks  known  to  it,  or  oj  which  it  had 

notice.     There  was  great  latitude  in  the  evidence  on 

the  part  of  plaintiffs.  .  .  .  The  purpose  and  end  was  to  show 

that  the  place  of  deposit  was  peculiarly  and  extraordinarily 

exposed  to  perils  from  robbers  at  the  time,  calling  for  more 

1  §  197.  First  National  Bank  v.  Ocean  National  Bank,  GO  N.  Y.  295. 

394 


LIABILITY   OF   BANK.  —  ORDINARY    CARE.  §199 

than  the  usual  cautions  from  the  bailee.  This  was  competent, 
so  far  as  facts  and  circumstances  proved  to  exist  were  com- 
municated to  the  officers  of  the  bank,  but  no  farther."  ^ 

§  198.   "  It  is  usually  stated  that  a  bailee  who  is  to  receive 
no  reward  is  liable  only  for  gross  negligence,  and  some  of  the 
cases  hold  that  such  a  bailee  is   responsible   only    ^^^^^ 
for  want  of  that  care  which  is  taken  by  the  most   ^''';'',j^""^'J_ 
inattentive.     But  that  rule  cannot  be  applied  to  all   ciinary  care 

J  .in  keeping 

cases  of  bailment  without  reward, /or  when  secun-   special  de- 
fies are  deposited  with  persons  accustomed  to  receive   P"*''' 
such  deposits,  they  are  liable  for  any  loss  occurring  through  the 
ivant  of  that  care  which  good  business  men  ivould  exercise  in  re- 
gard to  property  of  such  value.     This  was  the  degree  of  care 
required  of  the  bank  in  this  case.     Were  the  bonds  lost  for  the 
want  of  such  care  ?     They  were  demanded,  .  .  .  and  the  only 
excuse  given  for  not  delivering  them,  as  stated  in  the  answer 
of  the  bank,  was,  that  'the  said  bank,  not  having  any  such' 
bonds  in  its  possession,  did  not  deliver  any  to  the  plaintiffs.' 
No  explanation  was  offered,  and  no  reason  given,  for  the  bonds 
not  being  in  the  possession  of  the  bank.     We  hold  that  under 
these  circumstances  the  proof  of  demand  and  the  refusal  to 
deliver  was  sufficient  evidence  that  the  bonds  had  been  lost 
by  the  gross  negligence  of  the  bank.^ 

§  199.   In  England,  it  has  been  held  that  where  securities 
are  deposited  by  a  customer  with  his  banker  for  safe  keeping, 
or  for  the  purpose  of  having  the  interest  thereon    g     jj^i^g. 
collected  for  him  by  the  banker,  the  banker  is  not   posit. 
liable  if  the  securities  be  stolen,  unless  the  loss  has     "^  ^" 
been  caused  or  aided  by  his  gross  or  contributory  negligence.^ 
The  court  said :  "  It  is  clear  that  the  bank  in  this  case  was 
not  bound  to  more  than  ordinary  care  of  the  deposit  intrusted 
to  it,  and  that   the   negligence  for  which  alone  it  could  be 
made  liable  would  have  been  the  want  of  that  ordi-  q^,j;„jj^ 
narv  diligence  which  men  of  common  prudence  gen-  fare  the 
erally  exercise  about  their  own  anairs.     1  here  was 

2  Ibid. 

1  §  198.  First  National  Bank  i'.  Zent,  39  Ohio  St.  705. 
1  §  199.  Gibliu  v.  M'Mullen,  2  L.  R.  P.  C.  317;  38  L.  J.  V.  C.  25. 

395 


§  -200  SPFXIAL    DEPOSIT. 

an  entire  failure  of  evidence  of  the  want  of  that  ordinary 

care  which  the  bank  was  bound  to  bestow  on  the  idaintiff's 

deposit.      The    defendant's  evidence  added  to  the    plaintiff's 

case  the  important  fact,  that   in   the  strong-room   in   which 

the  i)laintiff's    debentures  were  kept   there  were,  beside  the 

boxes   of  other  customers,  bills,  securities,  and   specie,  the 

property  of  the  bank,  to  a  very  considerable  amount.     It  may 

he  admitted  not  to  be  sufficient  to  exempt  a  gratuitous  bailee 

from  liahiUty  that  he  keeps  goods  deposited  with  him  in  the 

same  manner  as  he  keeps  his  own,  though  this  degree  of  care 

will  ordinarily  repel  the  presumptioii  of  gross  negligence.     But 

there  is  no  case  which  puts  the  duty  of  a  bailee  of  this  kind 

higher  than  this,  that  he  is  bound  to  take  the  same  care  of  the 

property  intrusted  to  him  as  a  reasonably  prudent  and  careful 

man  may  fairly  be  expected  to  take  of  his  own  property  of  the 

like  description.     This  was  in  effect  the  question 

standard  de-    left  to  the  jury  iu  Domian  v.  Jenkins,  where  Lord 

""''^'  Dcnman  told  them  that  it  did  not  follow  from  the 

defendant's  having  lost  his  own  money  at  the  same  time  as 

the  plaintiff's,  that  he  had  taken  such  care  of  the  plaintiff's 

money  as  a  reasonable  man  would  ordinarily  take  of  his  own ; 

and  he  added  that  the  fact  relied  upon  was  no  answer  to  the 

action,  if  they  believed  that  the  loss  occurred   from   gross 

negligence."  ^ 

§  200.   A  bank   is  not  bound  to  use  more  than  ordinary 

Bank  not       j)rudence  in  the  care  of  a  special  deposit,  and  it  is 

bound  to        ^     I  (,  ^]^g  general  tendencv  of  the  courts  to  be  satis- 
more  than  or-  c>  .-^ 
dinarycare.    fif>(]  yvith  uo  Icss  than  Ordinary  care.^ 

The  bank  must  keep  a  special  dcjjosit  under  the  same  safe- 
guards afforded  to  its  own  like  property  but  merely  leaving 
the  safe  door  open  during  business  hours,  or  leaving  the  bank 
at  noon  in  charge  of  only  one  person,  is  not  even  negligence, 
let  alone  gross  negligence.^ 

2  Giblin  v.  M'Mullen,  2  L.  R.  P.  C.  317;  38  L.  J.  P.  C.  25. 

1  §  200.  Griffith  v.  Zipperwick,  28  Ohio,  388;  First  National  Bank  v. 
Zeiit,  39  Ohio  St.  105;  Levy  v.  Pike,  25  La.  An.  630;  Hills  v.  Daniels,  15 
id.  280;  First  National  Bank  r.  Ocean  National  Bank,  60  N.  Y.  295. 

2  "Whitney  v.  First  National  Bank,  55  Vt.  15-1. 

396 


LIABILITY    OF    BANK.  §  202 

§  201.    When  the  president  for  his  own  purposes  hypothe- 
cates bonds  that  are  held  by  the  bank  on  special  deposit,  and 
they  are  lost,  the  bank  cannot  be  iield  unless  the    Wiifuiactof 
ofiicers  knew  of  the   president's  conduct,  or  were   yond'duty 
guilty  of   gross  neglect  in   the  discharge  of  their   |I"^ke"bank 
duties,  and  this  neglect  opened  the  door  to  the  fraud,   1"*^j'«- 
or  lost  opportunities  of  recovering  the  property.     A  bank  is 
not  liable  by  reason  of  the  crime  or  any  wilful  act  of  an  offi- 
cer out  of  the  course  of  his  duty.^     (§  102  e,  A.) 

If  a  bank  is  guilty  of  no  negligence  in  the  selection  or  su- 
pervision of  its  officers  it  cannot  be  held  for  property  stolen 
by  them. 

A  bank  is  not  liable  for  the  act  of  its  officer  outside  of  his 
sphere  of  duty,  as  every  embezzlement  is,  e.  g.  in  case  of  break- 
ing o})en  a  cask  of  gold  coin  on  special  deposit  in  the  bank, 
and  taking  the  money.  It  was  not  the  duty  of  the  officer  as 
acting  for  the  bank  to  open  the  cask  ;  he  was  going  beyond 
his  authority,  and  the  bank  was  not  answerable  for  his  acts.^ 

§  202.  When  bonds  were. left  for  safe  keeping  and  were 
stolen  by  the  teller,  the  court  said :  "  Being  a  bailment  merely 
for  safe  keeping  for  the  benefit  of  the  bailor,  and  without 
compensation,  it  is  evident  the  dishonest  act  of  the   A^^t  beyond 

'■  1      1  •  1  ^"^  orhcer  s 

teller  was  in  no  way  connected  with  his  employ-  duty. 
ment.     So  long  as  the  bank  was  ignorant  of  the  dishonesty  of 
the  teller,  and  trusted  him  with  its  own  funds,  confiding  in  his 
character  for  integrity,  it  would  be  a  harsh  rule  that  would  hold 
it  liable  for  an  act  not  in  the  course  of  business  of  the  bank, 
or  of  the  employment  of  the  officer.    There  was  no  undertaking 
to  the  bailor  that  the  officers  should  not  steal.    Of  course,  there 
was  a  confidence  that  they  would  not,  but  not  a  promise  that 
they  should  not.  .  .  .  Nothing  short  of  a  knowledge  of  the 
true  character  of  the  teller,  or  of  reasonable  grounds   g^oss  ne- 
to  suspect  his  integrity,  followed  by  a  neglect  to  re-   ^''''*''' 
move  him,  can  be  said  to  be  gross  negligence,  without  raising 

i  §  201.  First  National  Bank  of  Allentown  v.  Rex,  89  Pa.  St.  308. 

2  Foster  v.  Essex  Bank,  17  Mass.  479;  Ray  v.  Bank,  10  Bush,  (Ky  ) 
344;  Finucane  v.  Small,  1  Esp.  R.  315;  Giblin  v.  MWIuUen,  2  L.  R. 
P.  C.  317. 

397 


§  203  SPECIAL   DEPOSIT. 

a  contract  for  care  higher  than  a  gratuitous  bailment  can 
create.^ 

The  fact  that  for  two  years  he  has  falsified  the  hooks  of  the 
bank  without  l)eing  discovered  was  held,  in  the  cited  case, 
not  to  be  such  negliirence  as  to  render  the  bank  liable.  For 
the  negligence  constituting  the  ground  of  liability  must  be 
such  as  enters  into  the  cause  of  the  loss ;  but  the  loss  here 
was  chargeable  to  the  immediate  act  of  dishonesty  of  the 
teller,  not  to  the  fact  that  he  had  purloined  the  bank's  funds 
or  falsified  the  bank's  books. 

A  bank  is  not  liable  for  loss  of  a  special  deposit  by  robbery, 
there  being  neither  fraud  nor  gross  negligence  im- 

Robbery.  ,  .    „ 

putable  to  it.^ 

More  proof  must  be  given  by  the  owner  than  merely  that 
the  bonds  were  stolen,  or  he  cannot  recover.^ 

When  the  i)laintiff's  evidence  fails  to  exclude  the  possibility 
of  loss  by  other  means  than  the  negligence  of  the  bank,  as 
where  the  evidence  tends  to  show  that  the  bank  did  use  due 
care,  and  there  is  no  evidence  of  negligence  in  the  selection 
of  cashier  or  of  clerks,  and  the  only  evidence  of  negligence  is 
that  provided  by  the  mere  fact  of  loss,  although  the  jn-esump- 
tion  of  innocence  will  protect  the  cashier  and  clerks  from  a 
charge  of  theft,  yet  it  will  not  "  sustain  the  burden  of  proof 
in  an  action  against  the  bank  for  negligence."  * 

§  203.  Varying  the  Contract  by  Agreement.  —  If  any  special 
arrangement  siiould  be  entered  into  by  which  the  bank  should 

1  §  202.  Scott  V.  National  Bank,  72  Pa.  St.  471. 

2  Whitney  v.  First  National  Bank,  55  Vt.  154  (1SS2). 
8  Wylie  V.  Northampton  Bank,  15  Fed.  Rep.  428. 

*  Smith  V.  First  National  Bank,  99  Mass.  605.  It  seems  to  be  law 
that  in  trover  proof  of  demand  and  refusal  will  throw  the  burden  on  the 
defendant,  to  -sliow  a  cfood  excuse  for  refusal  to  deliver;  but  that  in  as- 
sumpsit or  action  on  tlie  case  the  burden  is  on  the  plaintiff  to  make  out 
ne^"-ligence.  See  Story  on  Bailments,  §  213.  This  does  not  commend 
itself  very  strongly,  for,  the  facts  being  the  same,  the  form  of  action  should 
not  be  allowed  to  shift  the  burden.  The  substantial  and  common  sense 
fact  is,  that  the  defendant,  having  failed  to  deliver,  should  justify  himself, 
especially  as  the  facts  which  can  accomplish  that  object  are  peculiarly 
within  his  own  knowledge. 

398 


LIABILITY   OF   BANK.  —  EXPRESS   AGREEMENT.  §  203 

be  enabled  to  derive  any  advantage  or  profit  from  the  receipt 
and  custody  of  the  deposit,  or  if  it  should  accept  pay  for  the 
care  of  the  same,  then  its  duties  would  at  once  be  changed  to 
those  of  an  ordinary  bailee  for  hire.  Then,  as  in  the  sup- 
posed instance  of  robbery  or  embezzlement  by  one  of  its  own 
officers,  it  would  be  no  exoneration  from  liability  to  show 
that  the  same  care  had  been  taken  of  this  as  of  the  bank's 
funds,  and  that  the  same  officer  had  in  the  same  way  plun- 
dered the  bank  itself.  The  corporation  would  still  be  held  to 
make  good  the  bailor's  loss.  But  it  is  clear  that  some  such 
direct  advantage,  operating  by  way  of  consideration  for  the 
assumption  of  increased  responsibility,  must  accrue  to  the 
bank  to  place  it  under  such  an  obligation.  An  express  stipu- 
lation or  acknowledgment,  given  by  the  cashier  in  writing, 
to  the  effect  that  the  property  has  been  received  by  the  bank 
"  for  safe  keeping,"  does  not  make  the  transaction  other  than 
a  naked  baihiient,  as  above  stated.^ 

(a)  Showing  to  the  depositor  the  arrangements  of  the  bank 
for  safe  keeping  of  deposits  is  not  a  representation  increasing 
the  obligation  or  liability  of  the  bank.^  But  representations 
may  be  made  to  induce  parties  to  deposit,  which  may  call  for 
greater  care  on  the  part  of  the  bank,  or  by  agreement  the 
bank  may  even  become  an  insurer  of  the  deposit,  as  where  a 
written  promise  was  given  to  return  bonds  on  demand  or  pay 
their  value.^ 

(6)  A.,  at  the  solicitation  of  the  cashier  of  a  bank,  depos- 
ited with  it,  for  safe  keeping,  certain  bonds,  taking  a  receipt 
therefor,  stating  that  they  were  received  "  for  de-  Kepresenta- 
posit  in  the  vault  of  this  bank  at  the  risk  of  the   tiveofcash- 

^  ler  unau- 

depositor."     Held,  that,  in  absence  of  any  evidence   thorized  and 

•        1         1      r         unknown  to 

that  the  bank  was  accustomed  to  receive  bonds  lor  board,  can- 
safe  keeping,  except  owner's  risk,  or  that  the  di-  the  contract, 
rectors  had  knowledge  that  bonds  were  left  at  the   ^'^^  ^  ^^^' 
instance,  request,  or  solicitation  of  the  cashier,  evidence  of 
the  latter's  representations  at  the  time  of  the  deposit  as  to  the 

1  §  203.  Foster  v.  Essex  Bank,  17  Mass.  479. 

2  Hale  V.  Rawallie,  8  Kans.  136;  Maury  v.  Coyle,  34  Md.  235. 

399 


§  205  SPECIAL   DEPOSIT. 

safe  kcepinj^  of  the  bonds  was  not  sufficient  to  change  the 
effect  of  the  receipt  so  as  to  affect  the  bank.^ 

§  204.  Delivery  of  Special  Deposit.  —  A  bank  is  liable  for 
gross  negligence  in  keeping  or  delivering  a  special  deposit, 
Deiivervto  but  if  the  pcrsou  to  whom  it  negligently  delivers 
authorimi,  t^c  dcposlt,  \vitliout  requiring  evidence  of  any  au- 
ti.ouj;hn..t     thoritv  on  liis  part  to  receive  it,  was  nevertheless, 

known  to  be  •'  '-  i        •       i    i       j.i        3 

so,  is  good,     unknown  to  the  bank,  really  authorized  by  the  de- 
positor to  receive  it,  the  bank  is  discharged.^ 

The  bank  was  held  liable  where  the  teller  delivered  certain 
bonds,  left  as  a  special  deposit,  to  a  person  calling  himself  by 
Delivery  to  the  samc  name  as  the  bailor,  but  in  fact  not  being 
wrong  person.  ^|-jg  bailor ;  on  the  ground  that  the  teller  was  guilty 
of  gross  negligence  in  not  taking  proper  care  to  assure  him- 
self as  to  the  identity  of  the  stranger  with  the  bailor.*^ 

W.  left  securities  with  a  bank  for  safe  keeping,  taking  a  re- 
ceipt which  stated  that  tliey  would  be  delivered  on  its  surren- 
der. The  bank  delivered  to  W.'s  husband,  without  requiring 
production  of  the  receipt  or  of  an  order  from  W.  Held,  the 
bank  was  still  liable  to  W.^ 

A  bank  is  not  liable  for  delivering  special  deposits  to  an 
Delivery  to  agent  who  had  authority  to  control  them  for  cer- 
*ee»t-  tain  purposes,  unless  it  had  notice  of  the  revocation 

of  his  authority,  or  knew  the  use  he  was  going  to  make  of 
them,  and  that  it  was  an  unauthorized  usc.^ 

§  205.  A  Special  Deposit  is  no  Part  of  the  Bank's  available 
Assets.  —  As  has  been  seen,  a  special  deposit  (Joes  not  enter 
into  the  general  funds  of  the  bank,  and  form  a  part  of  its  dis- 
posable capital.  It  is  to  be  kept  by  itself,  and  specifically 
returned.  Hence  it  follows  that  a  bank  cannot  base  any  in- 
crease of  issues  or  discounts  upon  such  unavailable  deposits. 
They  are  in  no  sense  at  its  disposal,  and  it  can  in  no  man- 
ner (unless  there  be  a  special,  extraordinary,  and  peculiar 

=»  Comp  V.  Carlisle  Deposit  Bank,  94  Pa.  St.  409  (1880). 

1  §  204.  Chattahooclu'e  National  Bank  v.  Scliley,  58  Ga.  369  (1877) 

2  Lancaster  Bank  v.  Smith,  12  P.  F.  Smitlj,  54. 

8  Ganley  v.  Troy  City  National  Bank,  98  N.  Y.  487. 
*  Walker  v.  Manhattan  Bank,  25  Fed.  Rep.  247  (1835). 
400 


SPECIAL   DEPOSIT.  §  205 

arrangement)  reap  any  advantage  or  profit,  direct  or  indirect, 
from  the  simple  custody  of  them.  They  are  not  part  of  its 
moneys.  Whence  it  follows,  that,  if  the  law  require  the  bank 
to  return  to  the  government  officials  an  annual  account  of 
moneys  deposited,  yet  the  bank  is  not  bound  to  return  any 
account  of  its  special  deposits.^ 

Trover  will  lie  for  a  depositor  to  recover  his  special  deposit, 
in  specie  ;  or,  if  it  has  been  converted  by  the  bailee,  assum^nt 
will  lie  to  recover  its  value.^ 

1  §  205.  Foster  v.  Essex  Bank,  17  Mass.  479. 

2  Ibid. ;  Bank  of  Columbia  v.  Patterson's  Adm'r,  7  Cranch,  299;  Green 
0.  Sizer,  40  Miss.  530. 

VOL.  I.  26  401 


CHAPTER   XV. 

SPECIFIC    DEPOSIT. 

§  206.   Analysis. 

Duty  of  the  Bank. 
§  207.  A  specific  deposit  must  not  be  applied  to  any  other  purpose  than 

the  one  for  which  it  was  deposited,  and  the  instruction  accompa- 
§  208.  nying  it  must  be  carefully  carried  out. 

The  bank  has  no  lien  on  such  deposits  for  its  general  balance ; 
and  if  there  is  a  surplus  from  sale  of  collateral,  after  payment 
of  the  debt  secured,  the  bank  cannot  credit  it  on  general  ac- 
count.   §  325. 
Liability  of  the  Bank. 
(a)  Property  kept  distinct. 
§  189.  If  the  bank  is  a  gratuitous  bailee,  it  is  liable,  as  for  a  special 

deposit,  in  case  of  negligence. 
§  211.  If  the  bank  is  a  bailee  for  hire,  it  is  bound  to  ordinary  care,  and 

§  212.  no  more,  and  is  liable  for  loss  by  theft,  if  grossly  negligent. 

§  209.  Receiving  a  commission  does  not  necessarily  make  the  bank  a  bailee 

for  hire. 
§  215.     (b)  If  the  fund  is  not  kept  separate,  but  mingled  with  the  property  of 
the  bank  indistinguishably,  the  bank  is  liable  as  for  a  general 
deposit. 
§  630.     The  deposit  becomes  a  debt,  or  a  claim  for  damages  grows  upon  the 
§  589  b.     grave  of  the  trust. 
Title  to.     §  565  (2),  (9). 

§  207.  A  Specific  Deposit  must  not  be  diverted  from  its 
Purpose. —  A.  deposited  in  a  bank  the  counterparts  of  cer- 
tain contracts  to  deliver  oil  at  his  own  option  within  a  stated 
time,  and,  as  security  for  the  contracts,  also  deposited  checks 
of  H.,  who  was  a  depositor  in  the  bank,  payable  to  the  cashier, 
"  for  margin  for  oil  sold  as  per  contracts  in  the  hands  of  "  the 
cashier.  The  counterparts  were  indorsed  by  A.,  to  the  ef- 
fect that  the  margin  was  a  guaranty  for  the  fulfilment  of  the 
contracts,  and  with  the  further  stipulation,  that,  if  more  mar- 
gin be  needed,  demand  should  be  made  on  A.,  and  if  not  met 
the  contract  should  be  sold.  The  cashier  also  indorsed  on 
the  counterparts  the  receipts  for  the  margins  on  the  condi- 
402 


INSTRUCTIONS.  §  208 

tions  therein  set  forth.  Before  the  contracts  matured  they 
were  settled,  and  the  margins  were  carried  by  the  bank  to  the 
credit  of  A.,  who  drew  them  out  by  check.  In  an  action 
by  H.  against  the  bank  for  the  margins,  he  recovered,  the 
court  holding  that  the  checks  operated  as  a  specific  appropri- 
ation, to  the  extent  named  therein,  of  the  drawer's  funds,  to 
be  applied  by  the  bank  solely  to  pay  such  sum  as  A.  might  be- 
come liable  to  pay  on  the  event  of  his  failure  to  comply  with 
the  contracts,  and  the  bank,  as  custodian  of  the  money  for 
that  specific  purpose,  had  no  right  to  appropriate  it  in  any 
other  way.i 

So,  where  a  buyer  of  cattle,  indebted  to  a  banking  firm  as 
principal  upon  a  note  that  had  matured,  deposited  and  checked 
out  an  amount  greater  than  the  note,  under  a  special  agree- 
ment with  the  bank  that  he  would  give  the  sellers  checks 
payable  after  he  had  sold  the  cattle  and  deposited  the  pro- 
ceeds, and  that  the  bank  should  apply  such  deposits  exclu- 
sively to  pay  such  checks.  Eeld^  that  the  same  could  not 
have  been  applied  to  pay  the  note.^ 

§  208.  Instructions  accompanying  a  Deposit,  and  coming 
from  the  proper  authority,  must  be  carefully  attended  to. 
When  the  depositor  orders  his  money  to  be  put  on  one  of  his 
accounts,  or  to  be  applied  to  take  up  a  particular  check  or 
note,  or  to  be  transmitted  to  a  certain  person,  or  whatever 
special  direction  he  may  give,  the  bank  must  obey  if  it  re- 
ceives the  deposit  at  all.^ 

So,  if  money  is  left  by  C.  to  be  sent  to  bank  A.,  and  instead 
it  is  sent  (according  to  a  custom  among  the  banks)  to  B.,  the 
correspondent  of  A.,  without  notice  to  B.  that  the  fund  belongs 
to  C,  and,  A.  becoming  insolvent,  B.  applies  the  money  on 
A.'s  debt  to  itself,  the  depository  bank  is  liable  to  C.  for  the 
amount,  for  it  should  have  transmitted  directly  to  A.,  or  have 
accompanied  the  funds  with  notice  of  C.'s  rights,  so  that  B. 
could  not  have  acquired  title  to  them.^ 

1  §  207.     Parker  v.  Hartley,  91  Pa.  St.  465  (1879). 

2  Wilson  V.  Dawson,  52  Ind.  513  (1876). 

1  §  208.     Judy  V.  Farmers  &  Traders'  Bank,  81  Mo.  404. 

3  Drovers'  National  Bank  v.  O'Hare,  10  N.  E.  300  (111.,  April,  1887). 

403 


§  212  SPECIFIC  DEPOSIT. 

§  209.  A  Commission  does  not  al'vvays  make  the  Bank  a 
Bailee  for  Hire.  —  A  bank  was  in  the  habit  of  taking  bonds 
collecting  in-  foT  safc  keeping,  and  of  detaching  the  coupons  and 
bonds"and  Collecting  the  interest  for  the  depositors  of  the 
draf^rior  bonds.  It  scnt  these  coupons  to  city  banks,  and  the 
small  com-      proceeds  were  there  placed  to  its  credit,  and  ui)on 

mission,  does    -i  ^  ^ 

not  make  the  funds  thus  accuDfiulated  it  would  draw  drafts 
for  hire.  and  charge  a  small  commission  therefor.  Tlie  in- 
terest paid  by  the  city  banks  was  inconsiderable,  and  the 
amount  realized  therefrom,  and  the  commissions  on  drafts,  did 
not  compensate  for  the  trouble  of  forwarding  the  coupons  and 
paying  out  the  interest.  Held,  that  these  facts  did  not  consti- 
tute the  bank  a  bailee  for  hire.^ 

§  210.  Liability  for  Money  deposited  specifically.  —  It  is 
the  custom  of  banks  upon  receiving  money  for  a  specific  pur- 
pose, as  to  pay  a  note,  to  mingle  the  funds  with  their  own, 
and  to  pay  the  note  at  the  proper  time,  just  as  they  would  a 
check  ;  the  funds  arc  not  kept  separate.  There  is  no  practi- 
cal difference  between  such  a  deposit  and  a  general  deposit, 
and  it  seems  clear  that  the  bank  should  be  held  to  the  same 
liability  as  for  a  general  deposit.^ 

§211.  Liability  of  Bank  for  Collateral  Security. — In  the 
case  of  property  pledged  to  the  bank  as  collateral  security,  it 
has  been  said  that  the  bank  is  bound  only  to  ordinary  care  in 
keeping  it.^ 

§  212.    Gross   Negligence   makes   the   Bank    liable.  —  A  bank 

is  liable  for  securities  deposited  as  collateral  and  stolen  by 

the  president,  if  the  bank  has  been  remiss  in  its 

Collateral  se- 

curity  stolen  duty  in  the  selection  and  supervision  of  its  offi- 
by  president,  ^^^^g  i  j^^  ^Yi\s  case  the  trustccs  were  in  the  habit 
of  leaving  the  entire  active  management  of  the  bank  in  the 
hands  of  the  president;  he  had  occasionally  abstracted  se- 
curities and  used  them  in  his  own   private  affairs,  but  had 

1  §  209.    Cornp  v.  Carlisle  Deposit  Bank,  94  Pa.  St.  409  (1880). 
1  §  210.    IMcLain  v.  Wallace,  103  Ind.  503. 

1  §  211.   Jenkins  v.  National  Village  Bank,  58  Me.  275;  Dearborn  t;. 
Union  National  Bank,  58  id.  273;  61  id.  309. 
1  §  212,    Cutting  V.  Marlor,  78  N.  Y.  454. 
404 


LIABILITY    OF    BANK.  §  212 

been  accustomed  to  return  them  whenever  called  for.  It 
appeared  that  the  borrower  knew  of  these  facts  when  he  de- 
posited the  security.  The  trustees  did  not  hold  the  meetings 
required  by  the  by-laws.  The  court  held  that  the  bank  was 
bound  to  use  ordinary  care  to  select  good  officers  and  servants, 
and  that  it  must  exercise  such  supervision  and  vigilance  as  a 
discreet  person  would  use  in  his  own  affairs.  A  bank  might 
not  be  liable  for  a  single  act  of  fraud  or  crime,  where  it  would 
be  for  a  continuous  series  of  acts,  especially  so  easily  detected 
as  here.  Here  are  no  meetings,  no  supervision,  no  examina- 
tion, no  inquiry,  actual  knowledge  of  the  managing  trustee  of 
the  wrongful  conduct,  and  silence.^     Surely  a  strong  case. 

Bonds  were  deposited  as  a  special  deposit ;  afterward  they 
were  held  as  collateral  security.  They  were  embezzled  by 
the  cashier.  Held,  the  bank  was  liable  as  a  pledgee,  it  having 
been  guilty  of  gross  negligence  in  allowing  the  cashier  to 
retain  his  position  after  knowledge  that  he  gambled.^ 

2  Prather  v.  Kean,  29  Fed.  Rep,  498  (Feb.,  1887). 

405 


CHAPTER   XVL 

COLLECTION   IN   GENERAL. 

§  213.   Analysis.     (See  "  Title  "  and  "  Deposit.") 
A.   Nature  of  the  Contkact. 

§  214.  In  collecting  upon  paper  in  its  liands,  or  in  applying  money  pre- 

viously received,  the  bank  acts  as  agent  for  the  one  who  is  enti- 
tled to  the  proceeds ;  but  if  money  was  received  before  the  paper 
was  lodged  with  it  for  collection,  or  before  maturity  of  the  paper, 
and  not  applied,  it  has  acted  only  as  agent  of  the  debtor. 

§  215.  The  consideration  arising  from  the  hope  of  attracting  custom  is  suf- 

ficient, though  a  commission  may  be  charged. 

§  216.  The  authority  to  collect  continues  after  dishonor,  if  the  paper  is  left 

with  the  bank. 

§217.  Indorsement  to  "Bank,  for  collection,"  neither  carries  title  to  the 

bank,  nor  makes  the  indorser  liable  as  such,  but  is  notice  to  all  of 
the  indorser's  right  to  the  proceeds,  and  also  that  B.  or  his  agent 
is  the  proper  person  to  receive  payment. 
B.   Duty  of  the  Bank. 

I.  In  General. 

§§  218,  219.  (1)  The  bank  must  use  reasonable  care  and  skill,  keeping  in  mind 
the  best  interests  of  its  principal,  and  so  acting  as  to  pre- 
serve the  liability  of  all  parties  to  liim,  by  proper  present- 

§  244.  ment,  protest,  notice,  and  care  of  securities,  so  far  as  rea- 

sonable diligence  can  accomplish  these  objects.     See  §  239. 

§  230.  (2)  Tlie  bank  must  observe  the  laws  and  usages  prevailing  in  its 

§  243.  locus,  unless  the  contract  is  in  reference  to  some  other,  as, 

R  221.  When  it  receives  special  instructions,  or  wlien  the  parties 

must  be  presumed  to  have  contracted  in  reference  to  the 
usarje  of  a  particular  bank. 

§  222.  Proof  of  knowledge  of  usage  of  a  single  bank. 

§  223.  (3)  Local  usage  can  affect  only  the  manner  of  presentment,  notice, 

&c.,  and  cannot  justify  their  omission.     See  contra,  §  231. 

§  224.  (4)  The  bank  must  obey  inxfructlons  received  from  its  principal, 

and  must  forward  proper  directions  to  its  correspondent. 
§362. 

§  225.  (5)  Must  take  care  of  collateral  security,  bills  of  lading,  &c. 

§  226.  (G)  The  bank  has  discretion  in  doubtful  cases.     See  §§  255,  256. 

II.  Special  Statement  of  Duties  of  Bank  collecting  in  Locus. 

(1)  Presentment  for  acceptance.     See  §  252  a. 
^  258.  (a)  What  paper  must  be  presented  for  acceptance. 

K  227  (1)  Draft  payable  at  a  future  day  should  be  presented. 

406 


COLLECTION.  §  212 

§  268.  (h)  When  presentment  for  acceptance  should  be  made, 

where,  by  whom,  to  whom,  its  effect,  and  the  effect 
of  failure. 
§§  229,  259.  (2)  Presentment  for  payment. 

§§  240,  242,  245.  («)  Time  of. 

§§  230,  259  b.  (b)   Place  of. 

§§  223,  231.  (c)   Usage  of  some  banks  to  send  notice  to  the  debtor  that 

the  paper  is  at  the  bank,  instead  of  making  demand 
upon  him  in  the  regular  way, 
§  259.  (d)  By  whom,  on  whom,  and  how,  presentment  for  pay- 

ment should  be  made. 
§  228.  (3)  Protest,  or  steps  taken  to  provide  authentic  evidence  of 

dishonor.     See  §  252  c. 
§  260.  What  paper  should  be,  and  what  may  be,  protested, 

where,  when,  by  whom,  and  how  the  protest  is  to  be 
made. 
§  261.  (4)  Notice  of  dishonor. 

General  statement. 
§  232.  The  bank  need  give  notice  only  to  its  immediate  princi- 

pal, unless  agreement  or  usage  vary  the  rule. 

(a)  As  in  New  York  city. 

§  233.  (6)  When  notice  is  to  be  given. 

Manner  of  notice,  when  personal,  and  when  by  mail. 

(b)  Test  of  the  difference  of  place  requisite  to  use  of  the 

mail. 
§  234.  (5)  Excuse  for  failure  to  present  or  notify. 

§  262.  (6)  What  is  no  excuse. 

§  263.  §  234  a.    Insolvency  is  not. 

III.   Collections  not  in  the  Locus  of  the  Depositary. 
§  235.  Duty  of  the  transmitting  bank.     General  statement. 

To  select  its  agent  with  care,  transmit  instructions,  and 
inquire  promptly.     See  §  252  d. 
§  236.  What  is  due  care  in  selecting  a  sub-agent. 

It  is  negligence  in  the  United  States  to  send  the  paper  to  the 
drawee.     §  427. 
§  237.    IV.  Collection  of  Checks. 
§  238.  (1)  Distinction  between  duty  of  bank  to  its  customer  and  duties 

existing  between  other  parties. 
§  239.  Illustration.      The    time    of    presentment    required    to 

fulfil  the  bank's  duty  to  the  depositor,  and  the  very 
different  time    that   may  be  necessary   to  hold   the 
drawer. 
(2)  Time  of  presenting  checks.     See  §  259. 
§  240.  General  rule. 

§  247.  Special  rule,  where  a  check  is  taken  by  an  ag,ent  in  pay- 

ment without  authority  so  to  do. 
§  241.  Time  witliin  which  a  check  payable  in  another  place  must 

be  forwarded. 
§  246.  Time  enlarged  by  crossing,  in  some  cases. 

407 


§  212  COLLECTION    IN   GENERAL. 

§  242.  The  time  rule  may  be  varied  by  instructions,  course»of  deal- 

§  222.  inp,  general  usage  of  the  banks  in  a  city  or  town,  or  usage 

of  a  particular  bank,  in  certain  cases. 
§  244.  The  fundamental  rule. 

Underlying  all  questions  of  presentment,  notice,  &c.,  is 
that  the  bank  must  use  ordinary  care  and  diligence 
under  all  the  circumstances. 
§  245.       V.  Crossed  Chkcks. 

Must  be  paid  as  crossed. 

Time  for  presentment  may  be  enlarged  by  crossing. 
§  246.      VI.  Suits  by  thk  Bank  upon  Paper  it  holds  for  Collection. 

VIL  Proceeds.    §  589  c. 
§  247.  (1)  The  general  rule  is  that  only  good  money  is  to  be  re- 

ceived in  payment  of  paper  by  collecting  bank, 
(a)  Mode  of  dealing,  or  an  agreement,  may  vary  the 
rule,  and  a  bank  may  take  its  own  certificate 
of  deposit,  unless  the  taking  is  a  fraud.     §  305. 
(6)  A  substituted  note  may  be  recovered  by  the  owner 
of  the  note  for  which   the  substitute  was  re- 
ceived, 
(c)  Check  taken  in  payment  without  authority  is  at 
the  bank's  risk,  (unless  the  principal  ratifies  its 
action,  as  he  may  do,  by  receiving  the  check, 
■with  knowledge  of  the  facts  of  the  case,)  and 
it  should  take  care  to  preserve  the  evidence  of 
liability  of  prior  parties.     See  §  36G. 
§  247.  {d)  If  the  bank  receives  depreciated  currency,  it  must 

make  good  the  face  of  the  paper  in  good  money. 
(2)  Disposal  of  the  Proceeds. 
§  248.  The  bank  may  elect  to  credit  them  to  the  principal 

on  general  deposit  (unless  the  instructions  are  to 
collect  and  remit), 

(1 )  When  the  owner  is  a  depositor. 

(2)  When  he  is  not. 

Or  it  may  retain  them  as  a  special  deposit,  or,  with- 
out instructions,  remit  them  at  once. 

If  it  credits  them,  it  will  bear  any  loss  that  occurs 
by  depreciation  of  the  funds  received.  If  it  keeps 
separate  the  specific  funds,  it  may  at  any  time  dis- 
charge itself  by  delivering  them  to  the  owner  of 
the  paper,  from  the  collection  of  which  they  are  the 
proceeds. 
§  248  (a).  Insolvency  revokes  the  right  to  credit  the  proceeds, 

and  mingle  them  with  the  bank's  funds. 

Insolvency  of  the  collecting  bank. 

Insolvency  of  the  transmitting  bank. 
§  248  (6).  Proceeds  of  paper  having  forged  indorsement  belong 

to  the  rightful  owner  of  the  paper. 

Title  to  proceeds.    See  §  505. 

408 


COLLECTION.  §  214 

C.   Liabilities  growing  out  of  Collection. 
L    To  whom  the  liability  runs. 
§  249.  When  the  first  bank  becomes  debtor  to  the  owner. 

Liabilities  of  the  various  banks  to  the  owner. 
§  250.  Cessation  of  the  liability  of  the  agent  bank  to  tlie  owner,  when 

such  agent  becomes  a  honajide  holder.     See  §  565. 
§25L   §220.  LiABiLiTV  to  the  Real  Party  in  Interest. 

IL   Causes  of  liability. 
§  243.  Failure  to  follow  the  usual  course. 

§252.  (a)  Irregular  acceptance. 

(/))  Taking  check  instead  of  money.    English  usage  allows. 

See  §  247. 
(c)  Failure  to  protest.     §§  228,  259. 

Violation  of  instructions.     §§  220,  224. 
{(i)  Failure  to  inquire.     §  235. 
(e)   Negligent  loss  of  the  paper. 
§  253.  Default  of  brancli  bank. 

§  255.  Mistakes.    See  §  226. 

§  256.  Of  fact. 

Of  law. 
§  254.  When  Depositor  is  also  in  Fault. 

§  214.  The  Collecting  Bank  acts  as  Agent.  —  A  bank  re- 
ceiving paper  for  collection  is  generally  the  agent  of  the  party 
from  whom  it  receives  it ;  ^  sometimes  of  the  real  por  whom 
owner,  if  he  stands  farther  removed  in  the  chain  of  acts'Ts"^ 
title.2  But  in  no  sense  is  it  the  agent  or  trustee  for  "sent. 
the  maker  of  the  paper  it  holds  for  collection,  or  for  the  party 
who  is  indebted  thereon.  If  the  debtor  simply  pays  into  the 
bank  the  amount  due,  and  takes  up  his  paper,  he  is  thereby 
fully  acquitted  and  absolved.  He  is  not  responsible  for  the 
subsequent  fate  of  the  sum,  and  is  not  bound  to  inquire 
whether  it  comes  to  the  hands  of  the  person  entitled  to  it, 
or  is  lost,  wasted,  or  embezzled  in  the  bank.  As  he  is  under 
no  liability  of  this  description,  so  it  follows  that  he  has  no 
right  of  action  against  the  bank  if  it  fails  to  pay  over  properly. 
The  whole  business  is  completed,  so  far  as  he  is  concerned, 
by  his  payment  and  the  contemporaneous  surrender,  cancel- 
lation, or  destruction  of  the  evidence  of  his  debt.^ 

1  §  214.  Daly  r.  Butchers  &  Drovers'  Bank  of  St.  Louis,  56  Mo.  94, 
and  cases  cited  poM ;  Ward  v.  Smith,  7  Wall.  447. 

*  The  question  who,  as  principal,  naay  hold  the  bank  as  agent,  is  dis- 
cussed hereafter. 

8  Smith  V.  Essex  County  Bank,  22  Barb.  627. 

409 


§  215  COLLECTION   IN   GENERAL. 

If  a  note,  bond,  or  otlicr  instrument,  be  made  payable  at  a 
bank,  and  be  deposited  in  that  bank  for  collection,  the  bank 
becomes  the  agent  of  the  payee  to  receive  the  money. 
bie  iit  tiij  But  if  it  be  not  deposited  in  the  bank,  and  the  debtor 
deposits  money  there  to  meet  it,  then  the  bank 
is  the  agent  of  the  debtor,*  By  making  such  deposit  in 
due  season,  the  debtor  so  far  fulfils  his  duty  that,  if  the  obli- 
gation be  not  presented  there  for  payment  at  the  day  of  its 
maturity,  the  debtor  is  liable  for  no  loss  or  damage  which 
may  subsequently  accrue,  eitlier  in  the  way  of  interest  or  costs 
of  suit,  by  reason  of  the  delay.*  Apparently,  too,  he  should 
be  acquitted  if  subsequently,  and  before  demand  by  the  holder 
of  the  paper,  the  bank  should  fail. 

A  note  was  sent  to  the  M.  Bank  indorsed  for  collection  for 
the  Y.  Bank.  The  M.  Bank  had  received  money  from  the 
Agent  of  maker  to  pay  the  note,  but  failed  before  remitting 
receiv'im'-*'^"  the  proceeds,  and  the  note  was  found  uncancelled 
money  to  pay  amoug:  its  pancrs.      Held,  that  the  note  had  not 

note  not  mits  »  ^     '  ' 

possession,  bccu  paid ;  the  M.  Bank  had  done  nothing  as  the 
agents  of  the  holders  of  the  note  toward  paying  it.^ 

Tliis  case  brings  clearly  to  view  the  distinction  that  if  the 
bank,  having  received  a  note  for  collection,  afterward  collects 
the  money  for  it,  or,  having  the  money  already  deposited  for 
that  purpose,  applies  it  to  the  note,  these  acts  are  done  as 
agent  for  the  holder  of  the  note  ;  but  if  the  maker  deposits 
money  to  pay  a  note  before  it  is  received  by  the  bank,  or  be- 
fore it  is  due,  such  recieving  of  money  is  as  agent  of  the 
maker  only,  and  unless  the  bank  subsequently  does  some  act 
applying  the  money  upon  the  note,  it  does  not  act  as  agent  for 
the  note  holder,  and  the  latter  is  not  prevented  from  recover- 
ing the  paper  and  suing  the  maker  upon  it. 

So  if  A.  deposits  money  to  pay  a  claim,  and  before  applying 
the  money  to  this  purpose  the  bank  fails,  it  is  the  loss  of  A., 
not  of  his  creditor.*' 

§    215.     Consideration    for    Collecting.  —  Sometimes     banks 

*  Ward  V.  Smith,  7  Wall.  447. 

6  Sutherland  i'.  First  National  Bank  of  Ypsilanti,  31  Mich.  230. 

8  Moore  v.  Meyer,  57  Ala.  20. 

410 


CONSIDERATION.  §  217 

charge  a  commission  for  collection  where  the  business  is  re- 
quired to  be  done  in  distant  places.  Sometimes  they  do  it 
without  charge,  trusting  to  the  indirect  profits  and  advan- 
tages which  may  be  expected  to  accrue  by  reason  of  the 
chance  of  the  money  being  left  uncalled  for  during  a  few  days 
following  its  actual  receipt,  and  their  consequent  use  of  it  for 
that  time  ;  or  from  the  hope  of  attracting  customers  and 
increasing  their  business  by  offering  such  facilities  without 
extra  charges.  These  motives  of  self-interest,  which  must 
always  be  supposed  to  influence  the  bank  when  it  consents  to 
collect  without  direct  compensation,  are  to  be  regarded  as 
constituting  a  sufficient  and  valuable  inducement  for  the  un- 
dertaking to  collect ;  and  prevent  the  bank  from  availing  itself 
of  the  plea  that  its  contract  was  without  consideration.^ 

§  216.  Continuance  of  Authority  to  Collect.  —  Authority 
to  collect  continues  after  the  paper  is  due  and  protested,  and 
notes  are  often  left  with  a  bank  some  time  after  protest  in  the 
hope  that  they  may  be  taken  up,  as  they  often  are  to  save  the 
credit  of  the  debtor.  But  it  is  questionable  whether  a  pay- 
ment may  be  received  two  or  three  years  after  dishonor,  in  a 
currency  depreciated  to  one  twelftli  of  the  value  of  that  in 
which  the  note  should  have  been  paid  at  its  maturity .^ 

§  217.  Effect  of  Indorsement  for  Collection.  —  Indorsement 
for  collection  does  not  give  the  bank  title  to  the  paper,^  nor 

1  §  215,  Hall  V.  Bank  of  the  State,  3  Rich.  3G6.  Also  see  remarks  per 
Lord  Loughborough  in  Shiells  v.  Blackburne,  1  H.  Bl.  158;  the  analogy 
is  sufficiently  strong  to  make  this  case  an  authority  for  the  doctrine  of  the 
text.  But  in  Bank  v.  Butler,  41  Ohio  St.  519,  the  court  in  holding  the 
bank  excused  on  other  grounds  fortifies  itself  by  saying  that  the  bank  re- 
ceived no  remuneration. 

1  §  -216.    Alley  v.  Rogers,  19  Gratt.  366. 

1  §  217.  See  §  565,  Title.  So  if  a  note  is  sent  for  collection  and  the  bank 
allows  it  to  remain  uncancelled  among  its  papers,  and  fails,  the  note  is 
unpaid,  and  may  be  recovered,  although  the  bank  had  received  money 
from  the  maker  expressly  to  pay  it.  The  payment  not  having  been  actu- 
ally made,  and  the  title  to  the  note  being  in  the  depositor  of  it,  he  may 
reclaim  it.  Sutherland  v.  First  National  Bank,  31  Mich.  230.  So  col- 
laterals sent  with  a  draft  which  is  still  uncollected  may  be  recovered;  they 
are  not  assets  of  the  bank  in  case  of  insolvency.  Corn  Exchange  Bank  v. 
Blye,  2N.  Y.  112. 

411 


§  217  COLLECTION   IN   GENERAL. 

render  the  depositor  liable  as  an  indorser.^  But  the  bank  is 
deemed  the  holder  to  receive  and  transmit  notice  of  non- 
payment.^ 

Indorsement  to  "  B.  for  collection  "  is  notice  to  the  maker  of 
Notice  of  tlie  note  that  B.  or  his  agent  is  the  proper  party  to 
ownership,  collcct  tlic  notc,  and  if  he  pays  it  to  any  one  else  it 
is  at  his  own  risk.* 

A  bank  receiving  a  note  from  the  owner  indorsed  simply 
for  collection,  with  instructions  to  apply  the  proceeds  to  his 
indebtedness  to  the  bank,  does  not  receive  it  as  collateral 
security,  but  as  his  agent.^ 

Indorsement  for  collection  is  notice  to  all  parties  of  the 
ownership  of  the  proceeds,  and  the  collecting  bank  cannot 
keep  the  proceeds  to  pay  the  debt  of  the  bank  that  forwarded 
the  paper  to  it.^ 

A.  at  St.  Louis,  owing  V.  at  St.  Joseph's  140,000,  requested 
V.  to  draw  on  him,  and  he  would  raise  the  money  on  the 
Indorsement    draft,  and  remit  the  proceeds  to  V.  ;  whereupon  V. 

for  collection    ^  ^^    ^.j^^     ^j.^j^j.     ^f    ^Jjg     Ij^llk    at     St.    JoSCpll's, 

destroys  ne-  ' 

gotiabiiity.  whosc  cashicr  indorsed  on  the  draft,  "  Pay  to  H.  or 
order  for  collection  for  account  of  First  National  Bank."  A. 
on  receiving  the  draft  accepted  it,  and  offered  it  for  dis- 
count to  the  Mechanics'  Bank.  By  A.'s  consent  and  that 
of  the  Mechanics'  Bank  the  indorsement  was  erased,  the 
Mechanics'  Bank  discounted  the  draft,  and  A.  remitted  the 
amount  to  V.  In  an  action  by  the  Mechanics'  Bank  against 
v.,"  it  was  held  that  the  indorsement,  being  restrictive,  de- 
stroyed the  negotiability  of  the  draft,  and  operated  as  a  mere 
power  of  attorney  to  the  plaintiff  to  receive  the  proceeds  for 
the  use  of   the  drawer;   and  that  the  erasure  without  V.'s 

2  Brown  v.  Hull,  33  Gratt.  23.  And  parol  is  not  admissible  to  show 
that  an  indorsement  "  for  collection  "  was  really  an  absolute  one.  Third 
National  Bank  v.  Clark,  23  Minn.  263. 

8  Freeman's  Bank  v.  Perkins,  18  Me.  292;  Ogden  v.  Dobbin,  2  Hall, 
112. 

*  Barnet  r.  Rincrgold,  80  Ky.  289. 

*  Prescott  V.  Leonard,  32  Kans.  142. 

«  City  Bank  v.  Weiss,  3  S.  W.  299  (Tex.,  April,  1887). 
'  :Mechaiiics'  Bank  v.  Valley  Packing  Co.,  4  Mo.  App.  200  (1877). 
412 


bank's  duty.  §  219 

assent  destroyed  the  validity  of  the  draft  as  to  him,  and  the 
plaintiff  was  bound  to  know  that  such  was  its  effect  when 
the  draft  was  taken. 

§  218.    General    Statement    of    the    Duties    of   the    Collecting 
Bank.  —  A  bank  contracts  to  use  due  diligence  in  the  busi- 
ness of  collection.!     And  it  is  "  bound  only  to  rea-   j^^.^^^^^^,^ 
sonable  care  and  diligence  in  the  discharge  of  its   care  aud 
assumed  duties.     In  a  case  of  doubt  its  best  judg- 
ment is  all  the  principal  has  a  right  to  require."     Especially  if 
the  doubt  arises  by  reason  of  the  neglect  of  the  principal  to 
give  specific  instructions,  the  bank  will  be  acquitted,  even  if 
its  discretion  be  exercised  erroneously .^ 

The  contract  may  be  varied  by  express  agreement,  and  it 
has  been  held  that  the  plaintiff,  in  a  suit  alleging  negli- 
gence on  the  part  of  the  bank  in  failing  to  make  a  collection, 
may  adduce  evidence  of  the  contents  of  a  placard  posted  up^in 
the  bank,  whereby  the  bank  offered  to  make  collec-  ^,      , 

'  '  _  1  lacard 

tions  upon  certain  terms  (the  president  having  been  hunR  in  the 
notified  to  produce  the  placard,  and  not  having  done 
so)  ;  that  this  constituted  an  important  link  in  the  chain  of 
evidence  going  to  show  what  the  contract  between  the  par- 
ties in  fact  was ;  and  that  this  evidence  was  admissible  with- 
out preliminary  proof  that  the  plaintiff  had  read  the  placard, 
or  had  acted  upon  the  faith  of  it.^ 

§  219.  The  Bank's  Duty  is  to  act  for  its  principal's  best 
interest,  and  preserve  the  liability  of  all  parties  to  him.  "  It 
is  the  duty  of  an  agent  who  receives  negotiable  paper  for  col- 
lection, in  case  such  paper  is  not  paid,  so  to  act  as  to  secure 
and  preserve  the  liability  thereon  of  all  the  parties  prior  to 
his  principal  ;  and  if  he  fails  in  this  duty,  and  thereby  causes 
loss  to  his  principal,  he  becomes  liable  for  such  loss.  But 
this  is  not  the  utmost  limit  of  the  agent's  duty  and  lia- 
bility. He  may  so  act  as  to  charge  all  the  parties  to  the 
paper,  and   yet   become  liable  for  a  loss   occasioned  by  his 

1  §  218.  Fabens  v.  Mercantile  Bank,  23  Pick.  330. 
"  National  Bank  of  Commerce  v.  Merchants'  National  Bank,  91  U.  S. 
(1  Otto),  92. 

*  Wingate  v.  Mechanics'  Bank,  10  Barr,  104. 

413 


§  220  COLLECTION  IN  GENERAL. 

negligence.  The  rule  which  will  measure  the  diligence  which 
is  exacted  of  a  holder  of  such  paper  in  order  to  charge 
the  prior  parties,  will  not  always  measure  the  diligence  which 
is  required  of  a  collecting  agent  in  the  discharge  of  his 
duty  to  his  ])rincipal.  Suppose  an  agent  receives  for  col- 
lection from  the  payee  a  sight  draft.  No  circumstance  can 
make  it  his  duty  in  order  to  charge  the  drawer  to  present 
it  for  payment  until  the  next  day.  He  has  entered  into 
no  contract  with  the  drawer,  is  not  employed  or  paid  by  him 
to  render  him  any  service,  and  owes  him  no  duty  to  protect 
him  from  loss.  What  is  required  to  be  done  to  charge  the 
drawer  is  simply  a  compliance  with  the  condition  attached  to 
the  draft,  as  if  written  therein ;  and  that  condition  is  in  all 
cases  complied  with  by  presentation,  demand,  and  notice  on 
the  next  day  after  receipt  of  the  draft.  But  suppose  the 
a^nt  on  the  day  he  receives  the  draft  obtains  reliable  infor- 
mation that  the  drawee  must  fail  the  next  day,  and  that  the 
draft  will  not  be  paid  unless  immediately  presented,  what  then 
is  the  duty  he  owes  his  principal,  whose  interests  for  a  com- 
pensation he  has  agreed  with  proper  diligence  and  skill  to 
serve  in  and  about  the  collection  of  the  draft  ?  Clearly,  all 
would  say,  to  present  the  draft  at  once,  and  if  he  fails  to  do 
this  and  loss  ensues  he  incurs  responsibility  to  his  principal ; 
and  yet  the  drawer  would  be  charged  if  it  was  not  presented 
until  the  next  day.  When  an  agent  receives  a  bill  for  collec- 
tion payable  some  days  or  months  after  date,  in  order  to 
charge  the  drawer,  he  need  not  present  it  for  acceptance 
until  it  falls  due ;  and  if  he  then  presents  it  and  demands 
payment,  and  protests  it,  and  gives  the  notice,  the  drawer  is 
held  ;  and  yet  in  such  a  case  he  owes  his  principal  the  duty 
to  present  the  bill  for  acceptance  at  once,  and  if  he  fails  in 
such  duty,  and  loss  ensues  to  his  principal,  he  becomes  liable 
for  such  loss."  ^ 

§  220.  What  Law  and  Usage  shall  govern  the  Collection.  — 
The  collecting  bank  must  be  governed  in  all  matters  concern- 
ing the  time  and  mode  of  presentment,  demand,  and  notice 
by  the  laws  and  customs  which  prevail  in  the  place  of  its  own 

1  §  219.  First  National  Bank  v.  Fourth  National  Bank,  77  N.  Y.  323. 

414 


CONFLICT   OP  LAWS.  §  220 

situation.  If  the  paper  has  been  transmitted  from  a  distant 
place,  where  the  laws  and  customs  are  different,  ijank  must 
the  transmitting  party,  if  he  wishes  these  to  be  owuTaw^ 
conformed  to,  must  send  special  instructions  to  "("uctidns 
that  effect.  In  that  case  the  collecting  bank,  if  it  are  sent. 
undertakes  the  collection,  will  be  bound,  at  its  own  peril,  not 
to  deviate  from  the  course  thus  prescribed ;  though  in  the 
absence  of  express  directions  it  would  not  be  bound  to  inquire 
into,  nor  probably  would  it  even  have  the  right  to  recognize, 
if  it  knew,  the  laws  or  usages  of  any  place  other  than  its 
own.  The  understanding,  which  is  assumed  to  be  mutual  and 
to  enter  into  the  contract  of  the  parties,  is  that  the  bank  shall 
perform  the  various  acts  which  are  embraced  in  the  business 
of  collection  in  every  respect  according  to  the  method  which 
it  is  wont  to  pursue,  in  accordance  with  the  local  law,  rules, 
and  regulations. ^  Evidence  of  the  habitual  course  of  dealing, 
provided  it  be  not  incurably  illegal,  is  admissible,  not  as 
amounting  to  rules  of  judicial  decision,  but  as  evidence  of  the 
contract.2  The  assent  of  all  concerned  to  the  pursuance  of  this 
course  of  dealing,  and  their  waiver  of  any  strictly  legal  claims 
which  they  might  have  in  contravention  or  variation  thereof, 
becomes  then  an  implication  of  law.  All  the  parties  upon  the 
note  are  equally  bound  by  this  implication,  though  they  have 
had  nothing  whatsoever  to  do  with  the  paper  at  the  time  of  its 
being  deposited  for  collection,  and  so  were  not  by  immediate 
personal  action  parties  to  this  portion  of  the  proceedings,  or 
able  to  influence  or  control  them.^  They  are  bound  and  con- 
cluded by  the  act,  and  the  legal  implications  arising  from  the 
act,  of  him  who  has  become  the  holder,  and  who  has  the  right 

1  §220.  Lincohi  &  Kennebec  Bank  v.  Page,  9  Mass.  155;  Chicopee 
Bank  v.  Eager,  9  Met.  584;  Hartford  Bank  v.  Stedman,  3  Conn.  489; 
Bowen  v.  Newell,  5  Saudf .  326 ;  and  all  the  cases  cited  below  in  the  dis- 
cussion of  this  topic. 

2  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  582;  Blanchard  v.  Hilliard, 
11  Mass.  88;  Jones  v.  Fales,  4  id.  245;  Widgery  v.  Monroe,  6  id.  449; 
Renner  v.  Bank  of  Columbia,  9  Wheat.  581 ;  Yeaton  v.  Bank  of  Alex- 
andria, 5  Cranch,  49;  Bank  of  Columbia  v.  Fitzhugh,  1  Har.  &  G.  239; 
Hartford  Bank  v.  Stedman,  3  Conn.  489. 

^  Pearson  (Brent's  Ex'rs)  v.  Bank  of  Metropolis,  1  Pet.  89. 

415 


I  221  COLLECTION    IN   GENERAL. 

to  put  the  note  in  the  ordinary  business  channel  for  collection. 
Thus,  if  demand  is  made  upon  a  note  upon  the  day  before  or 
the  day  after  it  falls  due,  according  to  the  established  custom 
of  the  collecting  bank,  or  upon  the  fourth  day  after  maturity, 
under  a  local  custom  to  allow  four  days  of  grace  instead  of 
three,  the  maker  and  the  indorsers  will  be  held,  and  cannot 
set  up  insufficiency  or  irregularity  in  the  demand.^  So  a  cus- 
tom of  a  l)ank  to  hold  the  indorscr  without  having  first  sued 
the  maker,  tliuugh  he  is  solvent,  is  good.*^  So  likewise  a  cus- 
tom to  make  demand  on  the  maker  of  a  note  lodged  in  a  bank 
without  presenting  it  to  him.^ 

§  221.  Usage  of  the  Bank.  —  Knowledge  of  the  usage,  either 
express  or  implied,  must,  it  has  been  said,  be  brought  home 
to  the  parties  who  are  to  be  bound  by  it.i  But  other  cases  of 
high  authority  declare  that  the  usage  of  the  bank  in  collections 
will  bind  the  persons  dealing  with  it  in  this  business,  whether 
such  usage  be  known  to  them  or  not  ;2  and  this  is  certainly 
the  correct  rule.  Indeed,  the  opposing  cases  can  be  easily 
reconciled  by  the  link  which  appears  to  be  suggested  in  one 
of  them.  The  fact  that  one  deals  with  the  bank  without  tak- 
ing the  trouble  to  inquire  as  to  its  system  will  raise  the  im- 
plication that  he  already  knows  and  is  satisfied  with  that 
system.  It  is  clear  that,  if  a  person  hands  over  a  note  to  a 
bank  for  collection  without  any  species  of  remark  as  to  the 
course  to  be  pursued,  the  bank  is  not  bound  to  thrust  upon 
him  a  statement  of  its  intended  course,  and  to  retain  him  till 
the  whole  theory  has  been  expounded  to  him,  when  his  con- 
duct unmistakably  shows  that  either  he  already  knows  it  or 

4  Patriotic  Bank  v.  Fanners'  Bank,  2  Cranch,  C.  C  560;  Bank  of 
Columbia  v.  Magruder,  6  liar.  &  J.  172;  City  Bank  v.  Cutter,  3  Tick. 
414;  Yeaton  v.  Bank  of  Alexandria,  5  Cranch,  49. 

6  Renner  v.  Bank  of  Columbia,  9  Wheat.  581. 

«  Pearson  (Brent's  Ex'rs)  v.  Bank  of  the  Metropolis,  1  Pet.  89 ;  Raborg 
r.  Bank  of  Columbia,  1  Har.  &  G.  231 ;  Whitwell  v.  Johnson,  17  Mass. 
452;  City  Bank  v.  Cutter,  3  Pick.  414. 

1  §221.  Mills  V.  Bank  of  United  States,  11  Wheat.  431;  Peirce  v. 
Butler,  14  Mass.  303. 

2  Smith  V.  Whiting,  12  Mass.  6;  Bank  of  Washington  v.  Triplett,  1 
Pet.  25 ;  Dorchester  &  Milton  Bank  v.  New  England  Bank,  1  Cush.  177. 

416 


USAGE.  §  223 

else  he  does  not  desire  to  know  it.  Either  he  knows  and  ap- 
proves it,  or  lie  voluntarily  trusts  to  the  wisdom  of  the  bank, 
at  his  own  deliberately  assumed  risk  of  its  sufficiency.  In 
such  a  case  the  bank  not  only  has  a  right  to  assume,  but  it  is 
even  positively  bound  to  assume,  that  his  desire  is  that  the 
ordinary  and  established  usage  be  pursued.  An  unordered 
deviation  from  that  usage,  though  the  usage  were  unknown  to 
him,  would  lay  the  bank  open  to  his  suit  for  damages ;  and 
the  court  must,  as  has  been  already  shown,  rule  for  him  as 
matter  of  law  that  the  pursuance  of  this  custom  was  an  im- 
plied item  of  the  contract.  It  is  clear,  then,  that  he  could  not 
plead  ignorance  of  it  in  order  to  lay  a  foundation  for  a  suit 
against  the  bank  for  acting  according  to  it.  The  knowledge 
on  his  part  would  be  implied  conclusively.^ 

§  222.  Proof.  —  Whenever  it  may  be  necessary  to  prove 
knowledge  by  an  individual  of  the  usage  of  a  bank,  proof  of 
one  transaction  having  been  previously  conducted  between 
them  in  accordance  with  that  usage  is  sufficient.^ 

It  has  been  seen  that  the  time  when  demand  must  be  made 
may  be  modified  by  proof  of  usage  concerning  the  local  rule  of 
grace.  In  like  manner  proof  of  a  particular  usage  concerning 
the  place  at  which  demand  shall  be  made,  in  default  of  the 
designation  of  any  place  in  the  instrument  itself,  is  admissible, 
and  may  be  conclusive.  Thus,  where  a  customer  lived  at  a 
distance  from  his  bank;  and  was  wont  to  draw  his  notes  "  nego- 
tiable at "  the  bank,  it  was  held  that  it  was  a  proper  case  for 
the  introduction  of  evidence  of  a  custom  to  make  presentment 
and  demand  upon  his  notes  only  at  the  bank ;  which  custom, 
if  sufficiently  proved,  would  justify  the  collecting  bank  in  pre- 
senting and  demanding  in  compliance  with  it.^ 

§  223.  Usage  can  only  affect  Manner  of  Collecting.  —  But 
the  usages  which  can  be  shown  are  solely  those  which  qualify 

^  See  §  9,  on  Usage,  in  which  this  subject  is  further  discussed  and 
important  cases  are  cited,  showing  upon  what  grounds  knowledge  of  the 
usage  and  custom  of  the  banks  will  be  conclusively  inferred  at  law. 

1  §  •222.  Dorchester  &  JNIilton  Bank  v.  New  England  Bank,  1  Cush. 
177. 

2  Pearson  (Brent's  Ex'rs)  v.  Bank  of  the  Metropolis,  1  Pet.  89. 
VOL.  I.  27  417 


§  224  COLLECTION   IN   GENERAL. 

some  portion  of  those  proceedings  ■which  the  bank  is  obliged 
to  undertake  for  the  immediate  ])urpose  of  effecting  the  col- 
lection. It  is  only  the  points  of  detail,  or  the  methods  which 
the  bank  pursues  in  presenting,  demanding,  and  notifying, 
that  can  be  thus  modilied.  No  usage  will  justify  the  actual 
omission  of  any  of  these  substantial  and  material  acts,  nor  the 
substitution  of  any  other  act  as  an  equivalent  for  any  of  them. 
The  act  must  be  distinctly  done ;  it  is  only  in  reference  to 
the  manner  of  doing  it,  as  regards  time  and  ])lace  and  the  like 
considerations,  that  the  rigidity  of  the  general  doctrines  of  the 
law  may  be  slightly  deflected  by  the  force  of  local  rules.  Thus, 
thongli,  as  has  been  seen,  demand  may  be  made  a  day  or  two 
earlier  or  later  than  the  usual  third  day  after  the  literal 
maturity  of  the  paper,  yet  demand  must  be  made,  and  it 
must  be  a  real  bona  fide  demand.  No  usage  can  be  allowed 
to  substitute  a  notification  to  the  makers  of  the  time  and  of 
the  place  where  the  paper  is  deposited  for  collection,  instead 
of  the  positive  demand  of  payment  which  the  law  imperatively 
requires.^  The  contrary  has,  however,  been  held.  See  §  281 
below. 

§  224.   Instructions.  —  If  the  Customer  gives  any  instruc- 
tions or  directions  concerning  any  item  in  the  method  which  is 
to  be  pursued  in  collecting  or  protesting  the  paper, 

Bank's  fliitv  '  ,  f  r 

to  forward '    thc  bank  receivmg  the  paper  is  bound  to  forward 

instructions.  ^      •       ,         ,•  it         ,•  j-j  ^ 

such  instructions  and  directions  to  its  agent  or  cor- 
respondent. If  it  neglects  altogether  to  transmit,  or  if  it  fails 
to  transmit  them  accurately  as  the  customer  gave  them,  it 
will  be  lialjle  for  the  resulting  loss.^  It  may  often  happen 
that,  where  paper  payable  in  one  State  is  deposited  in  a  bank 
situated  in  another  State,  it  is  necessary,  in  order  to  hold 
some  of  the  parties  upon  it,  that  presentment,  demand,  and 
notice  should  all  be  performed  according  to  the  laws  and 
usages  of  the  State  in  which  the  first  bank  is  situated,  rather 
than  of  the  State  where  ttie  actual  collection  or  protest  is  to 
be  made.     In  such  case  it  is  certainly  more  proper  for  the 

1  §  223.    Farmers'  Bank  v.  Duvall,  7  Gill  &  J.  78. 
^  §224.    Borup  v.  Nininger,  5  Minn.  523;  Mechanics'  Bank  v.  Earp, 
4  Rawle,  384. 
418 


INSTRUCTIONS.  §  224 

depositor  to  notify  the  first  bank  of  this  fact.  But  it  seems 
that  even  if  he  docs  not  do  so,  yet  the  bank,  if  it  is  aware  or 
ought  to  be  aware  of  the  existence  of  the  necessity,  is  bound 
to  transmit  to  its  correspondent  full  and  amjTle  directions  as 
to  the  precise  form  to  be  adhered  to  throughout  the  whole 
process."^  In  fact,  it  was  upon  this  very  point  that  the  decision 
in  the  famous  case  of  Allen  v.  Merchants'  Bank  really  turned. 
The  facts  of  that  case  were  that  the  notary  in  protesting  com- 
plied perfectly  with  the  laws  and  customs  of  the  place  of  his 
own  residence.  But  these  were  different  from  the  laws  and 
customs  of  New  York  City,  wherein  the  Merchants'  Bank 
was  situated.  And  though  the  court,  choosing  to  call  this 
a  default  on  the  part  of  the  notart/,  which  was  not  cer- 
tainly his  personal  error,  or  his  default  at  all  in  any  usual 
sense  of  the  word,  gave  a  judgment  in  favor  of  the  plain- 
tiff, upon  the  ground  that  the  bank  was  liable  for  the  acts 
of  all  the  sub-agents ;  yet  it  was  not  really  necessary  for 
them  to  have  divided  upon  this  question  at  all,  provided 
they  were  all  united,  as  thej'  seem  to  have  been,  upon  the 
other  point  which  was  ruled  in  the  case.  This  other  point 
was  precisely  the  doctrine  just  asserted,  and  the  declara- 
tion in  the  opinion  was  simply  that,  since  the  lex  loci  con- 
tractus governed,  it  was  the  duty  of  the  bank  to  have  notified 
its  correspondents  of  the  requirements  of  that  law ;  and  in- 
asmuch as  the  loss  had  been  caused  by  the  failure  of  the 
notary  to  comjily  with  those  requirements  which  the  bank 
had  negligently  failed  to  transmit,  it  was  in  fact  caused  by 
the  non-performance  on  the  part  of  the  bank  of  its  obvious 
duty,  and  must  therefore  be  made  good  by  the  bank.  It 
is  curious  thus  to  observe  how  easily  the  whole  controversy, 
which  has  made  this  cause  famous,  and  a  subject  of  criticism 
in  so  many  tribunals,  might  have  been  completely  avoided 
in  it. 

A  bank    must  obey  the  instructions  of  its  principal,  and 
where  it  was  told  to  allow  a  renewal  of  a  note  on  condition 
that  a  good  indorser  should,  be  obtained  on  the  new   Liable  for 
note,  and  the  bank  took  a  renewal   without  such    insTru(!tionsf 
2  Allen  V.  Merchants'  Bank,  22  Wend.  215. 

419 


§  225  COLLECTION   IN   GENERAL. 

indorser,  it  was  held  liable  to  its  principal  on  the  subsequent 
insolvency  of  the  niakcr.^ 

Where  the  orders  were,  "On  jjayment  of  the  drafts,  you 
will  deliver  the  cargo  to  the  order  of  A.  If  not  paid,  please 
hold  and  advise  by  telegraph," — and  the  receiving  bank 
collected  the  sight  drafts,  and  took  an  acceptance  of  07ie  of 
the  drafts  tvhich  was  on  time,  and  delivered  the  cargo  of 
wheat,  the  bills  of  lading  of  which  accompanied  the  drafts, 
and  before  the  maturity  of  the  time  draft  the  acceptor  failed, 
the  question  of  negligence  went  to  the  jury.  The  court 
thought  there  was  a  violation  of  the  instructions  amounting 
to  negligence* 

But  where  the  drawee  is  entitled  to  delivery  of  the  bills  of 
lading  upon  acceptance  of  the  draft,  of  course  the  bank  is 
guilty  of  no  negligtmcc  in  so  doing." 

§  225.  Duty  of  Collecting  Bank  concerning  Collateral  Secu- 
rity. —  It  has  been  held  that  where  a  time  draft,  drawn  by 
consignors  of  merchandise  upon  the  consignees,  is  forwarded 
to  a  bank  without  any  special  instructions,  but  having  the 
bills  of  lading  for  the  merchandise  attached,  the  bank  is 
justified,  by  reason  of  the  implied  intention  of  the  parties 
and  the  usages  and  necessities  of  business,  in  surrendering 
the  bills  of  lading  to  the  consignees  upon  their  acceptance  of 
the  draft,  without  waiting  for  them  to  make  final  payment 
of  it.i 

Indorsement  by  a  bank  "for  collection"  on  invoices  that 
accompany  bills  of  lading  attached  to  drafts  creates  no  re- 
sponsibility on  the  part  of  the  bank  ;  it  is  not  a  guaranty 
that  the  bills  of  lading  are  genuine.^     "It  imported  nothing 

8  Central  Georgia  Bank  v.  Cleveland  National  Bank,  59  Ga.  6G7. 

*  National  Bank  r.  City  Bank,  103  U.  S.  G68. 

6  Woolen  V.  N.  Y.  &  Erie  Bank,  12  Blatchf.  359. 

J  §  '225.  National  Bank  of  Commerce  v.  ^lerchants'  National  Bank, 
91  U.  S.  (1  Otto)  92;  Lanfear  v.  Blossman,  1  La.  An.  148;  "Wisconsin 
Marine  &  Fire  Ins.  Co.  v.  Bank  of  British  North  America,  21  Upper 
Canada,  Q.  B.  284;  s.  c.  affirmed,  2  Upper  Canada,  E.  &  A.  282;  Mason 
r.  Hunt,  1  Dougl.  297. 

2  Craig  V.  Sibbett,  15  Pa.  238;  Hunter  v.  Wilson,  19  L.  J.  Ex.  8; 
Leather  v.  Simpson,  L.  R.  11  Eq.  398. 
420 


BILLS   OF   LADING.  §  227 

more  than  that  the  goods  which  the  bills  stated  had  been 
shipped  were  to  be  held  for  the  payment  of  the  drafts,  if  the 
drafts  were  not  paid  by  the  drawees,  and  that  the  bank  trans- 
ferred them  only  for  that  purpose."  ^ 

Where  a  customer  instructs  a  bank  to  accept  bills  of  ex- 
change drawn  against  bills  of  lading,  the  bank  does  not  have 
to  inquire  as  to  the  genuineness  of  the  bills  of  lading,  and 
though  they  prove  to  be  forgeries,  it  may  recover  the  amount 
paid  on  the  bills  of  exchange.* 

§  226.  Discretion  of  the  Bank  in  Doubtful  Cases.  —  If  any 
point  of  law  concerning  any  act  in  the  business  of  collection 
is  in  doubt  by  reason  of  liaving  never  been  adjudicated  upon, 
if  the  bank  using  its  best  discretion  should  pursue  the  course 
which  the  courts  subsequently  declare  to  be  improper  and  ille- 
gal, it  will  nevertheless  be  absolved  from  all  liability  for  the 
results  of  its  mistake.^  But  if  the  bank  makes  a  mistake  for 
which  it  has  no  such  excuse,  as  simply  a  mistake  of  misread- 
ing, it  will  not  be  discharged  from  its  liability  to  make  good 
the  consequent  loss.^  Though  of  course  in  this  case  of  a  mis- 
interpretation it  is  to  be  supposed  that,  if  the  writing  really 
appeared  so  illegible,  that  the  mistake  was  reasonably  excusa- 
ble, and,  which  is  essential,  the  bank  by  reason  of  distance 
and  want  of  time  was  actually  unable  to  obtain  directions  or 
explanations  from  competent  authority,  it  would  be  acquitted 
if  it  pursued  its  own  best  discretion.  In  the  cited  case  there 
was  obvious  negligence  on  the  part  of  the  bank  in  the  reading 
of  the  note. 

§  227.  Collections  made  in  the  Locus  of  the  Bank.  —  The 
duty  of  the  bank  to  the  holder  of  the  paper  which  is  received 
for  collection  differs  slightly,  according  to  the  character  of  the 
paper  and  the  place  where  it  is  made  payable.  First  in  order 
will  be  considered  those  collections  which  are  to  be  made  in  the 
same  place  where  the  collecting  bank  itself  is  situated.     For 

3  Goetz  V.  Bank  of  Kansas  City,  7  Sup.  Ct.  Rep.  318  (1887). 
*  Woods  V.  Thiedemann,  1  H.  &  C.  478. 

1  §226.  Mechanics'  Bank  v.  Merchants'  Bank,  6  Met.  13;  National 
Bank  of  Commerce  v.  Merchants'  National  Bank,  91  U.  S.  (1  Otto),  92. 

2  Bank  of  Delaware  County  v.  Broomhall,  38  Pa.  St.  135. 

421 


§  227  COLLECTION   IN   GENERAL. 

tlie  purpose  of  tliis  discussion  it  makes  no  difference  whether 
the  bank  is  itself  the  owner;  or  has  come  by  the  paper  directly 
from  the  hands  of  the  owner  or  his  agent ;  or  has  received  it 
from  a  correspondent  of  its  own  in  some  distant  place.  The 
only  conditions  are,  that  the  bank  performing  the  actual  col- 
lection be  situated  in  the  same  town  where  is  also  the  per- 
son who  is  bound  to  make  the  payment,  or  the  banking-house 
at  which,  by  the  terms  of  the  instrument,  payment  is  to  be 
made.  If  the  paper  be  a  [jromissory  note,  a  bill  of  exchange, 
or  a  draft,  the  duty  of  the  collecting  bank  is  comparatively 
simple.  It  must  perform  the  ordinary  requirements  in  the 
way  of  presenting  for  acceptance  if  the  paper  ought  to  be 
accepted,  and  of  presenting  for  payment  at  maturity  when 
such  presentment  is  necessary.  But  the  bank  is  not  liable 
for  neglecting  to  present  a  draft  where  presentment  is  not 
necessary  for  charging  any  of  the  parties,  and  must  there- 
fore be  legally  useless  even  if  made.^  If  either  acceptance 
or  payment  is  refused,  the  paper  must  be  sent  to  a  notary 
for  protest,  provided  there  is  any  occasion  for  having  it  pro- 
tested at  all.2  And  the  bank  is  liable  if,  through  an  erroneous 
opinion  as  to  the  legal  character  of  any  especial  piece  of  busi- 
ness paper,  though  in  an  unusual  form,  it  does  not  cause 
presentment,  demand,  and  protest  to  be  made  in  the  manner 
which  the  court  holds  to  be  necessary.^  Though  if 
tlie  person  from  whom  the  bank  received  the  paper 
is  immediately  accessible,  there  seems  to  be  no  reason  why 
the  bank  should  not  be  allowed  at  once  to  return  the  paper  to 
him,  and  leave  him  to  have  it  protested,  if  he  sees  fit.  But  in 
such  case  it  is  essential  that  the  return  can  be,  and  in  fact  is, 
accomplished  with  sufficient  despatch  to  leave  him  reasonable 
time  for  attending  to  the  protesting  before  it  is  too  late  to 
secure  its  advantages. 

As  it  is  the  duty  of  the  bank  as  agent  to  act  as  a  prudent 

1  §227.    Mobley  v.  Clark,  28  Barb.  390;  West  Branch  Bank  v.  Ful- 
iner,  3  Barr,  899. 

2  Georgia  National  Bank  v.  Henderson,  46  Ga.  487. 

8  Ibid.     But  see  National  Bank  of  Commerce  v.  Merchants'  National 
Bank,  91  U.  S.  92. 
422 


PRESENTMENT,   PROTEST,   ETC.  §  229 

man  would  in  his  own  affairs,  and  as  it  is  for  the  interest  of  the 
holder  of  a  draft  payable  at  a  day  certain  in  the  fu-  uutytopre- 
ture  to  present  it  at  once  for  acceptance,  since  accept-  payab[e  at  a 
ancc  binds  the  drawee,  and  if  it  is  not  accepted  the  '"ture  J^iy- 
owner  has  a  right  of  action  against  the  drawer  or  indorser  on 
notice  and  protest,  without  waiting  for  the  day  of  payment, 
therefore  the  bank  should  present  such  a  draft  for  acceptance 
witli  due  diligence.* 

§  228.  Notary's  Duty.  —  "  When  a  note  is  put  in  V)ank  for 
collection,  if  not  paid  when  due,  it  is  placed  in  the  hands  of  a 
notary,  whose  duty  it  is  to  demand  payment.  If  not  paid 
during  bank  hours  of  the  last  day  of  grace,  the  notary  on 
the  evening  of  that  or  on  the  next  day  gives  notice  to  all  the 
indorsers  if  they  reside  in  town,  if  out  of  town  then  by  the 
next  mail,  and  it  is  not  until  after  all  this  is  done  that  he 
returns  it  to  the  bank  under  protest,  and  notice  to  the  holder 
is  considered  no  part  of  his  duty."  ^ 

§  229.  Presentment  for  Payment.  —  Presentment  for  pay- 
ment should  be  within  business  hours,  and  when  a  note  is 
payable  at  a  bank,  that  means  during  its  hours  xime  of  pre- 
of  business  ;  but  if  a  demand  is  made  of  the  offi-  sentment. 
cers  at  the  bank  after  banking  hours,  and  the  cashier  or 
teller  states  that  there  are  no  funds,  the  presentment  is  suffi- 
cient.i  Demand  must  be  made  on  the  last  day  of  grace,  in 
business  hours ;  a  demand  on  any  previous  day  is  too  soon  to 
bind  the  indorser.^ 

The  general  usage  is  to  allow  three  days'  grace,  but  this 
rule  may  be  varied  by  custom  in  a  particular  local-   pavs  of 
ity  which  entered  into  the  contract  of  the  parties,^  ^''^'^^' 
or  by  express  agreement. 

4  Lenox  v.  Cook,  8  Mass.  460;  Whitehead  v.  Walker,  10  Mees.  & 
Wels.  696 ;  Robinson  v.  Ames,  20  Johns.  146.  See  3  Kent,  94,  and 
Mount  V.  First  National  Bank,  37  Iowa,  4.37. 

^  §  228.    Johnson  i-.  Harth,  1  Bail.  485  (S.  C). 

1  §  229.  Salt  Springs  National  Bank  v.  Burton,  58  N.  Y.  430;  First 
National  Bank  v.  Owen,  23  Iowa,  185;  Flint  v.  Rogers,  15  Me.  67. 

2  Farmers'  Bank  v.  Duvall,  7  Gill  &  Johns.  78. 

3  Bank  of  Columbia  v.  Magruder,  6  Harr.  &  Johns.  180;  Renner  v. 
Bank  of  Columbia,  9  Wheat.  581.     See  Usage. 

423 


^  Zdl  COLLECTION   IN   GENERAL. 

§  230.  Place  of  Presentment.  —  Thc  presentation  of  a  draft 
for  payment  at  thc  place  of  its  date  is  a  sufficient  demand  to 
charge  the  drawer  or  acceptor  after  notice  of  protest,  where 
the  place  at  which  it  was  payable  is  not  stated  in  the  writing, 
and  no  proof  made  that  any  ])articiilar  place  was  agreed  on.^ 

When  a  bill  or  note  made  payable  at  a  bank  is  present 
there,  with  thc  knowledge  of  the  bank,  and  ready  to  be  deliv- 
ered up  on  jiayment,  such  mere  presence  is  a  sufficient  de- 
mand ;  and  if  business  hours  pass  and  it  is  not  paid,  it  is 
deemed  to  be  dishonored  and  notice  must  be  given.^  And  the 
same  rule  holds  as  to  any  place  at  which  paper  is  made  paya- 
ble ;  ^  mere  presence,  if  known,  is  enough,  and  it  is  not  neces- 
sary even  that  it  should  be  in  possession  of  the  proper  officer.'* 
If  it  belongs  to  the  bank,  the  law  presumes  its  presence  there 
until  disproved.^ 

Mere  physical  presence  in  the  bank  unknown  to  the  officers, 
as  where  the  letter  containing  the  bill  slipped  through  a  crack 
in  the  cashier's  desk,  is  not  sufficient;  the  bill  is  not  ready  to 
be  delivered  on  payment.^ 

Where  the  maker  and  indorser  of  a  note  know  that  the 
bank  having  the  note  for  collection  has  made  the  office  of 
another  bank  its  own  for  discount,  deposit,  etc.,  and  put  its 
notes  held  for  collection  into  the  hands  of  this  other  bank, 
demand  at  said  office  is  sufficient.' 

§  231.  Usage  as  Altering  the  Rules  as  to  Place  of  Present- 
ment. —  A  custom  prevails  in  some  places  for  a  bank  to  send 
Usa  e  of  notice  by  mail  to  the  payor  a  little  before  maturity, 
bank  to  send   requesting  him  to  come  and  settle  at  the  proper 

notice  in-  . 

stead  of  pre-  time.  As  applied  to  paper  made  payable  at  the 
sen  ing.  })ani^^  of  coursc  there  is  no  difficulty,  the  law  being 
as  above ;  but  as  to  paper  not  in  terms  payable  there  trouble 

1  §  230.    Wittkowski  v.  Smith,  8i  N.  C.  671  (1881). 

2  Bank  of  United  States  v.  Carneal,  2  Pet.  54.3;  Chicopee  Bank  v. 
Philadelphia  Bank,  8  Wall.  641 ;  Folger  v.  Chase,  18  Pick.  63. 

3  Hunt  V.  JMaybee,  3  Seld.  206. 

<  Folger  V.  Chase,  18  Pick.  63;  State  Bank  v.  Napier,  6  Humph.  270. 
^  See  cases  quoted  in  notes  1  and  3. 
«  Chicopee  Bank  v.  Philadelphia  Bank,  8  Wall.  641. 
T  Crews  r.  Farmers'  Bank,  31  Gratt.  348. 
424 


PRESENTMENT.  §  231 

appears  when  a  bank  undertakes  to  substitute  such  a  custom 
of  presenting  by  such  notice,  instead  of  making  demand  upon 
the  payor  as  the  general  rules  of  the  law  merchant  require. 
In  Massachusetts  the  usage  is  so  general  as  to  have  become  a 
part  of  the  law  in  reference  to  which  parties  are  presumed  to 
contract.^  So  in  Maine,  but  Maryland  and  New  Hampshire 
contra} 

Upon  principle,  if  the  usage  were  prevalent  generally  among 
the  banks  of  a  given  place,  it  should  bind  persons  of  the  place, 
provided  the  paper  is  payable  in  that  place.^  But  if  the  usage 
is  that  of  a  particular  bank  only,  it  is  difficult  to  see  on  what 
ground  a  party  who  has  not  contemplated  that  bank  as  a  factor 
in  the  matter  can  be  held  by  such  a  custom,  merely  because 
some  holder  has  selected  that  bank  to  act  for  him  in  collec- 
tion.^ It  should  be  shown  that  the  party  knows  of  the  usage 
of  the  bank,  and  had  reason  to  suppose  the  bank  would  act  in 
the  matter  in  order  to  hold  a  party  who  has  not  selected  or 
adopted  that  bank  to  act  in  collecting  the  bill,  for  nothing 
less  will  lay  a  foundation  for  a  reasonable  inference  that  such 
party  contracted  in  reference  to  such  usage.  The  case  is  en- 
tirely different  from  those  in  which  the  bill  is  made  payable 
at  a  particular  bank,  for  then  the  parties  to  the  bill  are  dealers 
with  the  bank,  and  bound  by  its  usages,  whether  known  to 
them  or  not.*     See  §§9,  221." 

A  note  was  made  payable  to  a  certain  bank  or  order,  as 
if  for  discount  by  that  bank.  It  was  not  discounted  there, 
however ;  but  was  sold  to  another  party,  who  deposited  it 
in  the  bank.  It  was  held  that  the  sureties  were  liable  to 
pay  it.^ 

Sending  a  check  by  post  to  the  drawee  is  a  good  present- 

1  §  231.  Whitwell  v.  Johnson,  17  Mass.  449;  Grand  Bank  v.  Blanchard. 
23  Pick.  505;  Marine  Bank  v.  Smith,  18  Me.  99.  Contra,  Farmers'  Bank 
r.  Duvall,  7  Gill  &  J.  78  (Md);  Moore  v.  Waitt,  13  N.  H.  41-5. 

2  Adams  v.  Otterback,  15  How.  539  (S.  C);  Renner  v.  Bank  of  Co- 
lumbia, 9  Wheat.  587 ;  Dorchester  &  Milton  Bank  v.  New  England  Bank, 
1  Cush.  177. 

8  See  notes  1  and  2,  and  Pearson  v.  Bank  of  Metropolis,  1  Pet.  89. 
*  Mills  I'.  Bank  of  U.  S.,  11  Wheat.  431. 
6  Ward  V.  Northern  Bank,  14  B.  Monr.  351. 

425 


§  232  COLLECTION   IN   GENERAL. 

meiit ;  but  if  the  money  does  not  come  back  by  the  return 
mail,  notice  of  dishonor  should  be  given. *" 

Jf  a  bill  of  exchange  is  presented  through  a  banker,  one 
more  day  is  allowed  for  giving  notice  of  dishonor  than  would 
be  allowed  if  it  were  presented  by  the  party  himself.  But  no 
additional  time  is  allowed  iov  presentment  for  jyayment? 

If  a  note  be  payable  at  a  particular  bank,  and  at  maturity 
the  bank  has  no  place  of  business  and  another  occupies  its 
room,  it  is  suOicient  to  present  it  for  payment  at  such  room.^ 

§  232.   Notice  of  Dishonor.  —  Where  a  bank,  not  upon  its 

own  account  but  as  agent  for  collection,  holds  indorsed  paper 

of  any  dcscriiition  which  is  dishonored,  it  has  been 
Not  tlie  -11  •      •      , 

bank's  duty    qucstioued  to  wlioui  it  IS  bouud  to  givc  noticc  01 

b!i"ks  mim^-  the  dishonor,  —  whether  only  to  its  own  principal, 
pairunkss'"  t^^^^  is  *o  ^^y-)  t^^^  pa''ty  from  whom  it  received 
there  is  a       ^jg  papcr,  or  to  tiie  makers  and  all  the  indorsers 

us-ai^e  to  the  '     ■*       ' 

coiiViary,  or    thcrcon.     The  decisions  have  not  from  the  outset 

an  agreement.  p       ^      i  •  -rt    i      ^        t      i    •         ±^     i. 

been  peiiectly  harmonious.  Jiut  the  doctrine  that 
the  duty  extends  to  the  notification  of  any  persons  behind  the 
party  recognized  by  the  bank  as  its  immediate  principal  is 
comparatively  little  supported.  The  chief  authority  is  the 
New  York  case  of  Smedes  v.  The  Bank  of  Utica.^  But  in  this 
case  there  was  evidence,  wdiich  the  court  deemed  satisfactory, 
of  an  established  custom  and  general  understanding  to  this 
effect  in  New  York,  and  it  was  strictly  upon  this  evidence 
that  the  decision  was  really  based ;  though  the  judge  inti- 
mated that,  if  this  proof  had  been  omitted,  it  was  possible  that 
the  court  might  have  taken  judicial  cognizance  of  the  usage. 
Thus  this  ruling  really  is  entitled  to  no  weight  in  a  discussion 
of  the  general  principle  of  the  law  ;  and  even  the  judge's 
remark  serves  only  to  show  how  universal  and  notorious  was 
the  usage  in  his  own  State,  and  has  not  at  all,  and  docs  not 
communicate  to  the  ruling,  the  character  of  a  general  prin- 

«  Bailey  v.  Bodenham,  10  L.  T.  n.  s.  422;  12  W.  R.  8G5. 

7  Alexander  v.  Burchfield,  Car.  &  M.  75;  3  Scott,  N.  R.  555;  7  M.  & 
G.  1001. 

8  Lane  v.  Batik  of  West  Tennessee,  9  Heisk.  419  (1872). 
1  §  232.    20  Johns.  372;  3  Cow.  662. 

426 


DISHONOR.  §  232 

ciple.  The  language  of  the  court  in  a  few  other  cases,  more 
especially  in  McKinster  v.  Bank  of  Utica,^  Fabens  v.  Mercan- 
tile Bank,3  Bank  of  Washington  v.  Triplett,*  and  West  Branch 
Bank  v.  Fulmer,^  has  been  regarded  as  sustaining  the  same 
view.  The  language  used  might  induce  the  citation  of  these 
causes  as  authorities,  but  they  can  serve  only  as  very  weak 
ones,  and  perhaps  it  would  hardly  be  an  unfair  statement  to 
say  that,  so  far  as  they  bear  upon  this  precise  point,  they  con- 
tain little,  if  anything,  more  than  obiter  dicta.^  On  the  other 
hand,  the  authorities  which  take  the  opposite  view  are  numer- 
ous, direct,  and  weighty.' .  Among  them,  as  cited  in  the  mar- 
gin, it  will  be  noticed  that  there  are  other  cases  decided  in  New 
York  ;  and  especially  should  be  noted  one,  later  in  date  than 
any  of  those  to  the  contrary  effect  occurring  in  the  decisions 
in  the  same  State.  Therein  the  court  acknowledge  that  the 
question  whether,  where  the  note  is  sent  for  collection  merely, 
it  is  a  presumption  of  law  that  the  collecting  agent  will  notify 
all  parties,  is  one  of  much  embarrassment,  and  not  clearly  set- 
tled in  New  York.  Previous  cases  in  the  State,  being  those 
just  cited,  have  arisen  between  a  holder  and  an  early  indorser, 
and  concern  the  point  whether  such  indorser  could  be  held  by 
virtue  of  a  series  of  notices  sent  day  by  day  by  each  indorser 
in  turn  to  his  predecessor.  But  the  discussion  has  never 
arisen  directly  between  the  holder  and  the  collecting  agent, 
where  the  right  of  the  former  to  recover  from  the  latter  has 
turned  upon  whether  or  not  the  latter  had  contracted,  as 

«  9  Wend.  46;  11  id.  473.  «  23  Pick.  330, 

*  1  Pet.  25.  5  3  Barr,  399. 

^  See  also  Curtis  v.  Leavitt,  15  N.  Y.  9;  Montgomery  County  Bank  v. 
Albany  City  Bank,  3  Seld.  4G0;  and  Foster  v.  Essex  Bank,  17  INIass.  479. 

■'  State  Bank  i'.  Bank  of  the  Capital,  41  Barb.  343;  Bank  of  United 
States  V.  Goddard,  5  Mason,  366;  Phipps  v.  Milbury  Bank,  8  Met.  79; 
Colt  V.  Noble,  5  Mass.  167;  Eagle  Bank  v.  Chapin,  3  Pick.  180  (see  com- 
ments upon  this  case,  made  by  the  court  in  Phipps  v.  Milbury  Bank, 
supra);  Mead  v.  Engs,  5  Cow.  303;  Howard  v.  Ive.s,  1  Hill,  263;  Spencer 
V.  Ballon,  18  N.  Y.  327;  Farmers'  Bank  v.  Vail,  21  id.  485  (cited  in  41 
Barb.  343,  supra);  Bank  of  Mobile  v.  Huggins,  3  Ala.  n.  s.  206;  Branch 
Bank  v.  Knox,  1  id.  148.  So  the  English  case  of  Haynes  v.  Birks,  3  Bos. 
&  P.  599.     See  also  Bank  of  United  States  v.  Davis,  2  Hill,  451. 

427 


§  232  COLLECTION   IN   GENERAL. 

part  of  his  undertaking  to  collect,  to  notify  all  the  indorsers. 
After  a  careful  consideration  of  all  the  precedents,  the  court 
conclude  that  the  collecting  bank  need  notify  only  its  own 
principal,  from  whom  it  has  immediately  received  the  paper. 
In  the  case  cited  from  Mason's  Reports  the  matter  is  sub- 
jected to  a  very  thorough  and  satisfactory  discussion,  as  it  is 
also  in  the  case  of  Phipps  v.  Milbury  Bank.  Where  the  weight 
of  opposing  authorities  is  so  very  disproi)ortionately  balanced, 
and  especially  where  the  latest  among  the  authorities  all  con- 
sistently incline  in  favor  of  the  doctrine  which  was  already 
the  stronger,  it  can  hardly  be  considered  that  the  true  rule 
is  any  longer  open  to  doubt.  It  must  be  assumed  now  to  be 
law  that  the  notification  to  the  principal  —  i.  e.  to  the  imme- 
diate predecessor  in  possession,  the  party  from  whom  the 
bank  receives,  no  matter  what  may  be  the  nature  of  the  title 
or  interest  of  that  party  to  or  in  the  paper  —  is  sufficient  to 
acquit  the  bank.  But  though  this  is  settled  as  the  general 
rule,  it  is  of  course  open  to  material  variation  from  extrinsic 
causes.  A  special  agreement,  express  or  implied,  between  the 
bank  and  its  principal,  may  require  notice  to  be  given  to  all 
the  parties,  or  to  any  particular  party,  on  the  paper.  So  a 
local  usage,  as  in  New  York  City,  or  the  usage  of  the  col- 
lecting bank,  to  notify  indorsers  or  makers,  may  render  it 
obligatory  upon  the  bank  to  do  so,  as  a  part  of  the  contract  of 
collection.  There  can  be  no  question  that  the  court  in  the 
case  of  Smedes  v.  Bank  of  Utica  was  right  in  admitting  evi- 
dence of  such  usage ;  and,  of  course,  also  in  being  governed 
by  it,  since  it  was  sustained  by  satisfactory  proof.  None  of 
the  cases  in  which  this  decision  has  been  since  commented 
upon,  and  which  in  the  absence  of  proof  of  usage  have  laid 
down  an  opposite  doctrine,  have  criticised  the  correctness  of 
the  course  then  pursued  in  this  matter.  On  the  contrary,  they 
have  by  plain  implication  a]iproved  it. 

(a)  It  should  seem,  too,  that  the  bank  ought  to  choose  dis- 
tinctly between  the  two  courses.  For  if  it  undertakes  to 
Evidence  of  notify  all  the  parties,  and  does  not  do  so  properly,  it 
an  ap-ee-       |    ^^  |g^g^  possiblc  that  it  might  be  held  responsible 

ment  to  no-  r  z-i 

tify  all.         for  the  loss  arising  from  the  insufficiency.    Certamly 
428 


DISHONOR.  —  NOTICE.  §  233 

the  fact  of  its  undertaking  to  notify  all  would  be  very  strong 
evidence  that  the  notification  of  all  was  understood  to  be  a 
part  of  the  contract.  Indeed,  it  has  been  held  that  the  fact 
of  notification  to  a  part  only  of  the  indorsers  was  admissible 
in  evidence,  as  going  to  show  an  agreement  to  notify  all,  and 
the  court  only  restricted  its  force  by  saying  that  it  was  not 
conclusive  to  this  effect.^ 

{h}  Each  transferee  of  a  check  has  one  day  allowed  him  in 
which  to  give  notice  of  its  dishonor  to  his  transferrer.  Nor 
does  it  make  any  difference  that  any  one  or  more  of  the  trans- 
ferees are  parties  who  liave  been  simply  organs  of  transmis- 
sion without  any  actual  interest  in  the  check.^ 

Notice  of  dishonor  may  be    given  at  once,  on  refusal  to 
pav  upon  demand  in  business  hours  of  the  last  day   When  notice 
of  grace ;  it  is  not  necessary  to  wait  till  the  day  is   given, 
done.^*^ 

((.')   No  notice  need  be  given  if  the  party  has 
actual  knowledge  of  the  fact  to  be  notUied.^^ 

§  238.  Manner  of  Notice.  —  The  general  rule  is  that  per- 
sonal notice  must  be  given  to  a  party  in  the  same  place  as 
the  bank,^  but  a  mailed  notice  is  sufficient  if  such  Notice  by 
is  the  usage  of  the  bank  at  which  a  note  is  payable  ;  ^  by  usage, 
and  an  indorser  (A.)  who  receives  notice  by  mail  may  for- 
ward notice  to  his  indorser  (B.)  by  mail,  if  he  does  it  the  same 
day,  so  that  it  would  reach  his  indorser  the  same  day  he  would 

8  State  Bank  v.  Bank  of  the  Capital,  41  Barb.  343. 

^  Prideaux  v.  Criddle,  L.  R.  4  Q.  B.  455;  Burnham  v.  Webster,  19 
Me.  232. 

"  Farmers'  Bank  v.  Duvall,  7  Gill  &  Johns.  78. 

"  West  Branch  Bank  v.  Fulmer,  3  Pa.  399. 

^  §  233.  When  an  indorser  dwells  in  the  same  post-oflSce  delivery,  the 
notice  must  be  personal,  or  left  at  his  residence  or  place  of  business. 
Forbes  v.  Omaha  National  Bank,  10  Neb.  338 ;  Louisiana  State  Bank  v. 
Rowell,  6  Mart.  506;  Babcock  t^  Benham,  4  Hill,  129. 

-  And  what  is  its  usage  is  a  question  of  fact  for  the  jury.  Carolina 
National  Bank  v.  Wallace,  13  S.  C.  347  (1879).  See  Gindrat  v.  Mechan- 
ics' Bank,  7  Ala.  324;  Usage,  §  9.  The  parties  to  a  note  payable  at  a 
bank  are  dealers  with  the  bank,  and  bound  by  its  custom  as  to  notifying 
by  mail.  Chicopee  Bank  i;.  Eager,  9  Met.  583;  Mills  v.  Bank  of  United 
States,  11  Wheat.  431. 

429 


§  234  COLLECTION   IN   GENERAL, 

have  received  the  notice  sent  to  A.  if  it  had  been  originally 
addressed  to  B.  instead  of  to  A.^  In  Alabama,  notice  that 
may  be  sent  by  mail  under  the  law  merchant  is  sufficiently 
addressed  if  sent  to  the  residence  or  post-office  nearest  the 
residence  of  the  party  to  be  charged  at  the  time  he  became  a 
partji,  without  regard  to  his  residence  at  the  time  of  notice.* 

When  the  ])rotest  is  made  at  a  different  place  from  that 
where  the  parties  reside,  the  mail  may  be  ])roperly  used.^ 

(rt)    As  to  the  test  of  difference  in  place,  the  United  States 
Supreme  Court  holds  that,  even  though  the  parties  get  their 
mail  at  the  same  post-office,  yet  if  the  party  to  be 
ference  in       notified  lias  no  residence  nor  place  of  business  in 
^  '*''^'  the  town,  but  lives  two  or  three  miles  in  the  coun- 

try, the  mail  may  be  used.^  Other  authorities  make  the  post- 
office  the  test ;  if  the  parties  get  their  mail  at  the  same  post- 
office,  the  mail  is  not  to  be  used  (unless  the  place  of  payment 
is  elsewhere),  for  the  post  is  not  to  be  made  a  place  merely 
of  deposit,  and  is  only  j^roperly  used  for  transportation  ; "  this, 
however,  is  of  course  subject  to  exception  where  a  postal  de- 
livery ^  exists  in  the  city  where  the  parties  live,  or  where  it 
is  the  usage  ^  of  a  bank  to  deposit  notice  in  the  post-office,  as 
such  a  usage  will  bind  those  dealing  with  the  bank. 

§  234.  Waiver  of  Demand  and  Notice.  Insolvency  no  Ex- 
cuse. —  Indorser's  acknowledgment  of  "  the  receipt  of  notice 
of  protest  on  the  witliin  note,"  (a  note  delivered  to  a  savings 

8  Uuited  States  National  Bank  v.  Burton,  58  Vt.  426;  Manchester 
Bank  v.  Fellows,  28  N.  H.  302;  Shelburne  Falls  National  Baukr.  Towns- 
ley,  102  Mass.  177. 

"  John  V.  City  National  Bank  of  Selma,  57  Ala.  90  (1876). 

6  Ilartforrl  Bank  v.  Stedman,  3  Conn.  489;  Greene  v.  Farley,  20  Ala. 
322;  Eagle  Bank  v.  Hathaway,  5  Met.  212;  Warren  v.  Oilman,  17  Me. 
360. 

^  Bank  of  Columbia  v.  Lawrence,  1  Pet.  578. 

'  Eagle  Bank  v.  Hathaway,  5  Met.  212;  Shelburne  Falls  National 
Bank  v.  Townsley,  102  Mass.  177;  Louisiana  State  Bank  v.  Rowel,  6 
Mart.  506. 

^  Shoemaker  v.  Mechanics'  Bank,  59  Pa.  St.  83;  Walters  v.  Brown,  15 
Md.  292. 

9  Chicopee  Bank  v.  Eager,  9  Met.  583;  Mills  v.  Bank  of  U.  S.,  11 
Wheat.  431. 

430 


COLLECTION   IN    DISTANT   PLACES.  §  236 

bank  as  collateral  security  for  a  previous  loan,)  was  held  to  re- 
lease the  bank  from  all  obligation  to  demand  payment  or  give 
notice  of  non-payment.^ 

(a)  Insolvency  of  the  drawee  will  not  excuse  failure  to  pre- 
sent for  payment  or  acceptance,  or  failure  to  give  notice  of 
nonpayment  or  non-acceptance.  From  friends  or  unknown 
resources  the  drawee  may  have  power  to  pay,  and  only  when  a 
party  cannot  possibly  be  damaged  by  the  want  of  due  present- 
ment or  notice  is  the  failure  excused.  The  mere  fact  that  he 
has  not  been  injured  is  no  defence,  if  he  might  have  been  dam- 
aged by  the  omission.^ 

§  235.  Collections  that  are  not  to  be  made  in  the  Locus  of  the 
Bank.  —  When  the  paper  is  payable  in  some  other  place  than 
that  in  which  the  bank  is  located,  its  duty  is  (1st)  to  for- 
ward the  bill,  or  note,  or  check,  in  proper  season,  to  a  sub- 
agent  selected  with  due  care ;  (2d)  to  send  to  such  agent  any 
instructions  bearing  upon  its  duty  that  may  have  been  re- 
ceived from  the  depositor  (§  224)  ;  and  (8d)  to  make  inquiry 
with  due  diligence  if  notice  of  the  arrival  of  the  paper  does 
not  come  to  it  within  such  time  as  it  might  reasonably  be 
expected.     See  §§  235,  252  ci 

§  236.  Selection  of  Sub-agent.  —  The  bank's  duty  is  to  use 
every  reasonable  precaution,  so  far  at  least  as  its  own  action 
is  concerned,  to  secure  the  collection,  if  possible  ;  and,  failing 
in  this,  the  prompt  and  accurate  performance  of  all  the  items 
connected  with  the  protest.  It  must  therefore  either  trans- 
mit to  a  bank  in  good  standing,  or  hand  over  to  a  notary  in 
good  repute,  as  the  case  may  be.      And  if  it  be   proved  to 

1  City  Savings  Bauk  v.  Hopson,  53  Conn.  453  (1885). 

2  1  Parsons  on  Notes,  446,  5'28,  551,  630;  Story  on  Notes,  286,  367; 
Story  on  Bills,  318,  326,  346;  Daniel  on  Neg.  Inst.,  1171,  1172;  Chitty 
on  Bills,  354,  396,  490;  Smith  v.  Miller,  52  N,  Y.  545;  Taylor  v.  Manuf. 
Co.,  82  111.  579;  Hawley,  Dodd.  &  Co.  v.  Jetter,  10  Oregon,  36. 

Where  the  bank  was  in  default  in  presentation  and  protest,  it  was 
held  that,  in  a  suit  for  damages  by  the  owner  of  the  note,  the  bank 
might  show  that  the  maker  of  the  note  was  insolvent,  and  that  there  had 
been  no  real  loss  to  the  holder;  but  evidence  only  that  the  maker  was 
in  embarrassed  circumstances  was  declared  inadmissible.  Steele  i'.  Rus- 
sell, 5  Keb.  211. 

431 


§  236  COLLECTION   IN    GENERAL. 

have  been  careless  in  the  choice  of  the  agent,  and  to  have 
selected  one  which  it  knew  or  ought  to  have  known  to  be  an 
improper  one,  it  will  be  answerable  for  the  injury  resulting 
therefrom.^  Ordinarily,  of  course,  it  will  be  very  strong 
evidence  of  due  care  on  the  part  of  the  bank  if  it  is  shown 
to  have  selected  the  agent  which  it  is  wont  to  employ  for 
the  transaction  of  its  own  business  of  the  same  nature,^  and 
the  courts  are  accustomed  to  speak  of  such  evidence  as  if 
it  were  substantially  conclusive.  Generally  it  may  be  thus 
regarded,  but  it  is  clearly  possible  that  a  bank  may  be  shown 
to  be  culpably  remiss  in  the  selection  of  its  own  agents, 
and  then  the  fact  that  the  agent  was  employed  in  its  pri- 
vate affairs  would  be  no  excuse  for  the  employment  of  the 
same  agent  in  the  affairs  of  the  customer.  The  contract 
is  not  that  the  bank  shall  emi)loy  its  own  usual  agents,  but 
that  it  shall  employ  proper  agents. 

By  the  custom  of  London  bankers,  when  a  foreign  check 
is  paid  to  a  banker  by  a  customer,  if  the  banker  has  no 
agent  at  the  place  where  the  check  is  payable,  he  sends  it 
direct  to  the  banker  on  whom  it  is  drawn,  demanding  pay- 
ment, and  the  banker  immediately  cither  remits  the  money 
or  returns  the  check .^ 

(a)  But  in  this  country  the  party  who  is  to  pay  a  check 
is  not  a  suitable  agent  for  its  collection. 

Not  proper  to  A  Chicago  bank  received  a  certified  check  for 
agent  whh  a  coUcction,  and  sent  it  to  the  drawee  bank.  The 
manifest  ad-    j^ttcr  mailed  in  return  a  worthless  draft,  surrcn- 

vcrse  interest.  ' 

But  see  New  dcrcd  the  clicck  to  the  drawer  as  paid,  failed,  and 
in  (b).  closed  its  doors.     The  Chicago  bank  was  liable  to 

the  depositor  for  the  full  amount  of  the  check.  The  debtor 
cannot  be  the  disinterested  agent  of  the  creditor  to  collect 

1  §236.  Fabens  v.  Mercantile  Bank,  23  Pick.  330;  iEtna  Insurance 
Co.  V.  Alton  City  Bank,  25  111.  213;  Stacy  v.  Dane  County  Bank,  12 
Wis.  629;  Bellemire  v.  United  States  Bank,  4  Whart.  105;  Bowling  v. 
Arthur,  34  Miss.  41. 

2  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  583;  Hyde  v.  Planters' 
Bank,  17  La.  560;  Baldwin  v.  P.aiik  of  Louisville,  1  La.  An.  13. 

8  Heywood  v.  Pickering,  Law  R.  9  Q.  B.  428  (1874). 

432 


3ELECTT0N   OF   SUB- AGENT.  §  237 

tlie  debt,  and  it  cannot  be  considered  reasonable  care  to 
select  an  aj^cnt  known  to  be  interested  aj^ainst  tbc  i)rincipal, 
to  put  the  latter  into  the  hands  of  his  natural  adversary; 
surely  it  is  not  due  care  in  one  holding  a  j)roniissory  note 
for  collccticni  to  send  it  to  the  debtor,  trusting  him  to  pay, 
delay,  or  destroy  the  evidence  of  debt,  as  his  conscience  may 
permit.  With  esjiocial  force  does  this  reasoning  apply  to  the 
case  of  a  certilied  check,  for  on  that  the  bank  is  primarily 
liable.* 

{b)  Pennsylvania  also  holds  that  a  bank  on  which  a  check 
is  drawn,  though  not  certified,  is  not  a  suitable  agent  for  its 
collection.^ 

In  New  York^  it  has  been  held  that  the  bank  at  which  a 
note  is  payable  is  a  suitable  agent  to  collect  it  from  the 
maker  ;  such  a  bank  has  no  primary  liability,  and  in  this  case 
there  was  no  indorser  except  the  maker.  It  was  not  a  claim 
against  the  bank,  and  the  court  found  that  it  was  a  usual 
method  of  business  to  send  by  mail,  and  that  whether  it  was 
or  was  not  negligence  to  send  to  that  bank  at  which  the 
note  was  payable,  it  was  clear  that  no  injury  resulted  from  it 
in  this  case ;  the  damage  ivould  have  arisen  just  the  same,  if  a 
third  party  had  been  agent. 

(c)  It  is  not  a  reasonable  usage  to  send  the  draft  to  the 
drawee,  and  run  the  risk  of  receiving  worthless  paper  in 
return,  and  of  sacrificing  the  claims  of  the  owner  on  prior 
parties."  An  independent  agent  should  be  selected,  and  he 
should  take  nothing  but  money,  unless  he  has  authority  to 
do  otherwise. 

§  237.  Collection  of  Checks.  —  Where  the  instrument  re- 
ceived for  collection  is  a  check,  the  duties  of  the  bank  become 
somewhat  more  complicated,  at  the  same  time  that  a  more 
correct  understanding  of  them  is  rendered  vastly  more  im- 
portant by  reason   of  iha  immense  amount   of  business  of 

<  Drover's  National  Bank  v.  Anglo-Amer.  P.  &  P.  Co.,  117  111.  100 
(1S8G). 

6  Merchants'  National  Bank  v.  Goodman,  109  Pa.  St.  422. 
6  Indig  V.  City  Bank,  80  N.  Y.  100. 
'  Whitney  v.  Esson,  99  Mass.  311. 

VOL.  I.  28  433 


§  238  COLLECTION   IN   GENERAL. 

this  description  which  all  banks  are  obliged  to  transact. 
Every  bank  of  deposit  in  the  country  is  wont  daily  to  receive 
from  its  customers  upon  deposit  for  their  credit  great  num- 
bers of  checks  drawn  upon  other  banks.  Whenever  a  check  is 
deposited,  and  credit  therefor  is  given  on  the  depositor's  check- 
book, the  memorandum  may  be  subsequently  cancelled  if  the 
collection  should  not  be  accomplished  in  due  course.^  If  cir- 
cumstances should  cause  the  obligation  in  any  ])articular 
transaction  to  run  to  any  person  or  party  other  than  the 
one  from  wliom  the  bank  receives  the  check,  the  nature  of 
the  obligation  is  not  thereby  substantially  affected  ;  certainly 
it  can  never  be  increased.  The  duty  of  the  bank  is  still 
precisely  the  same  duty,  though  it  may  prove  that  a  true 
owner,  not  at  first  known  to  the  bank,  is  the  party  who 
is  really  entitled  to  claim  a  performance  of  that  duty,  or 
damages  for  its  breach.  For  the  sake  of  brevity,  we  will 
hereafter  designate  the  person,  whoever  he  may  be,  to  whom 
the  obligation  of  the  bank  runs,  as  the  depositor  or  the 
customer. 

§  238.  Distinction  between  the  Duty  of  the  Bank  to  the  Cus- 
tomer and  the  Duties  existing  between  other  Parties.  —  It  is 
necessary  in  the  outset  thoroughly  to  disembarrass  the  rela- 
tion of  the  bank  to  the  customer,  and  consequently  the  whole 
matter  of  the  duties  and  liabilities  of  the  bank  in  the  prem- 
ises from  two  wholly  distinct  and  alien  subjects;  to  wit, 
the  relation  of  the  payee,  owner,  or  holder  of  the  paper  to 
the  maker,  drawer,  or  acceptor  thereof;  and  the  relation 
of  the  jiarty  giving  it  in  charge  to  the  bank  to  any  other 
person  standing  earlier  in  the  progression  of  title.  With 
the  two  last  mentioned  considerations  the  collecting  bank 
has  nothing  whatsoever  to  do;  it  may  ignore  them  utterly; 
in  fact,  oftentimes  it  may  even  be  incumbent  upon  it  to 
ignore  them  utterly,  for  they  may  be  rendered  by  circum- 
stances in  any  particular  case  inconsistent  with  its  own  dif- 
ferent, peculiar,  and  wholly  independent  obligations  in  the 
business. 

The  reiteration  of  this  doctrine  must  be  pardoned  by  reason 
1  §  237.    National  Gold  Bank  v.  McDonald,  51  Cal.  G4. 
434 


COLLECTION   OF   CHECKS.  §  23!) 

of  its  importance.  The  common  law,  speaking  throuf^h  a 
great  multitude  of  decisions,  has  laid  down  tlu;  rules  which 
govern  the  presentment  of  checks  as  between  the  drawer,  the 
indorsers,  and  the  various  subsequent  holders  ;  and  there  is 
comjilication  enough  in  the  topic.  The  common  law  has,  in 
like  manner,  laid  down  the  principles  controlling  the  present- 
ment of  checks  by  a  collecting  bank  as  between  the  bank  and 
the  depositor  ;  and  in  this  topic  also  there  is  independent 
and  ample  complication.  The  entanglement  of  the  two  would 
result  in  a  senseless  and  inextricable  confusion.  If,  then,  one 
deposits  a  check  in  a  bank,  there  is  a  certain  time  within 
which  the  bank  is  bound  to  that  depositor  to  present  the 
check  to  the  drawee  for  payment.  It  may  be  that  a  present- 
ment within  a  shorter  limit  of  time  would  be  necessary  to 
enal)le  the  payee  to  hold  the  drawer,  or  to  enable  the  holder 
to  hold  his  indorscr,  in  case  of  non-payment;  or  it  may  be 
that  presentment  after  that  time  would  suffice  for  both  these 
purposes.  Neither  of  these  facts  modifies  or  affects  the  time 
within  which  the  bank  is  bound  to  its  customer  to  present. 
By  the  ordinary  rule  of  common  law,  this  time  is  until  the 
close  of  banking  hours  on  the  business  day  next  following 
that  on  which  the  bank  comes  into  possession  of  the  check. ^ 
This  is  the  general  rule,  and  of  course  is  liable  to  occasional 
modifications,  which  will  be  noticed  hereafter. 

§  239.  It  may  be  well  to  illustrate  more  fully  the  principles 
above  laid  down ;  for  they  are  fundamental  and  important. 
A.  and  B.  are  both  living  in  the  same  town,  and  keep  their 
bank  accounts  at  the  C.  and  D.  banks  respectively,  also  in  the 
same  town.  A.  gives  his  check  upon  the  C.  bank  to  B.  on 
Monday.  B.  deposits  it  in  the  D.  bank  on  Tuesday.  The  D. 
bank  presents  it  for  payment  to  the  C.  bank  on  Wednesday. 
In  this  case  the  D.  bank  will  have  done  its  full  duty  by  B. 
under  the  rule  of  the  common  law  above  laid  down.     It  will 

1  §  238.  Byles  on  Bills,  p.  *20;  Boddington  v.  Schlencker,  4  B  &  Ad. 
752;  1  Nev.  &  Man.  540;  Alexander  v.  Burchfield,  Car.  &  M.  75;  3  Scott. 
N.  R.  555;  7  Man.  &  Gr.  1061;  Hare  v.  Henty,  10  C.  B.  N.  s.  65;  Kick- 
ford  V.  Ridge,  2  Camp.  537;  Moule  v.  Brown,  4  Bing.  N.  C.  2G6;  5 
Scott,  G94. 

435 


§  240  COLLECTION   IN   GENERAL. 

have  presented  for  payment  on  the  day  after  it  received  the 
check.  So,  if  the  C.  bank  wore  paying;  checks  all  day  Tues- 
day, but  stopped  payment  on  Wednesday  morning,  B.  would 
have  no  remedy  against  the  D.  bank  for  laches  or  neglect  of 
duty.  Neither  could  he  look  to  A.  ;  for  A.  had  a  right  to  have 
])ayment  of  his  check  demanded  upon  Tuesday,  and  depos- 
iting it  in  the  bank  could  not  be  allowed  to  extend  his  risk 
over  Wednesday  also.  If  A.  did  not  wish,  or  was  not  able, 
to  deposit  on  Monday,  he  should  either  have  made  demand 
himself  on  Tuesday,  instead  of  depositing,  or  he  should  have 
deposited  under  a  special  agreement  with  his  bank  that  it 
was  cither  to  demand  payment  on  Tuesday,  or  else  itself  to 
assume  the  risk  of  the  customary  postponement  till  the  fol- 
lowing day.  In  like  manner,  if  A.  and  B.,  and  their  respect- 
ive banks,  were  in  two  distant  towns,  and  A.  delivered  or 
sent  to  B.  his  check,  the  common  law  would  declare  in  what 
manner  and  within  what  time  B.  must  despatch  his  check  to 
the  C.  bank  for  payment.  The  cases  generally  hold  that  the 
check  must  be  mailed  so  as  to  go  by  the  mail  of  the  day  fol- 
lowing its  receipt,  in  ordinary  cases.  But  this  is  the  rule 
as  between  A.  and  B.  only,  and  the  breach  of  it  would 
only  operate  to  imperil  B.'s  right  of  action  against  A.  But 
if  B.  deposits  in  his  bank,  his  bank  has  the  right  to  for- 
ward the  check  to  the  0.  bank  through  its  wonted  channel 
of  correspondence  ;  and  it  is  not  ordinarily  obliged  to  start 
it  upon  this  progress  until  the  day  after  it  receives  it.  See 
§  245. 

§  240.  Time  of  Presentment  of  Checks.  —  A  check  must  be 
General  presented  within  a  reasonable  time,  which  is  set- 

'""'®'  tied  in  ordinary  cases  to  be  before  close  of  business 

hours  on  the  day  following  its  receipt.^ 

But  "  when  a  check  is  taken  instead  of  money,  by  one  act- 
ing for  others,  a  delay  of  presentment  for  a  day,  or  for  any 
Check  taken  t^tno.  bcyoud  that  within  which  with  proper  and 
by  agent.       reasonable  diligence  it  can  be  presented,  is  at  the 

1  §  240.  Burklialter  v.  Second  National  Bank,  42  X.  Y.  538;  Turner 
V.  Bank  of  Fox  Lake,  3  Keyes,  425;  23  How.  Pr.  399 ;  Taylor  v.  Wilson, 
11  Met.  51. 

436 


COLLECTION    OF   CHECKS.  §  241 

peril  of  the  party  thus  retaining  tlie  check  and  postponing 
presentment,  as  between  him  and  the  persons  in  interest 
whom  he  represents."  ^  And  where  hjss  occurs  because  such 
a  check  is  not  presented  on  the  day  of  its  reception,  the  agent 
is  liable.'^ 

Lord  Ellenborough  well  said  that  it  would  be  impossible  for 
any  banker,  receiving  checks  by  mails  due  at  various  hours  all 
through  the  day,  to  kee[>  an  army  of  clerks  ready  to  Lord  Ellen- 
present  them,  or  forward  them,  all  upon  the  day  of  ^^'^^^s^- 
receipt.  "  Bankers  would  be  kept  in  a  continual  fever,  if  they 
were  obliged  to  send  out  a  check  the  moment  it  is  paid  in." 
The  arrangement  of  presenting  or  forwarding  on  the  next 
following  day  "  appears  subservient  to  general  convenience, 
and  not  contrary  to  the  law  merchant,  which  merely  requires 
checks  to  be  presented  with  reasonable  diligence."  * 

§  241.  In  like  manner,  each  bank  in  the  chain  of  progress 
has  a  right  to  delay  forwarding  until  the  business  day  next  fol- 
lowing the  day  of  its  own  receipt.  So  if  C.  bank  Ynne  of 
and  D.  bank  are  in  two  provincial  towns,  and  D.  ^"^'""arding. 
bank  has  no  correspondent  in  the  place  where  C.  bank  is 
situated,  it  may  send  to  its  correspondent  in  the  nearest  large 
town  or  city  whose  facilities  for  collecting  from  C.  bank  are, 
or  might  reasonably  be  supposed  to  be,  greater  and  more 
available.  This  course  of  proceeding  on  the  part  of  B.'s 
bank  may  be  perfectly  sufficient  as  an  acquittance  of  its  duty 
and  liability  to  B.  Yet  it  may  also  be  perfectly  consistent 
with  B.'s  loss  of  his  remedy  against  A.  in  case  payment  of  the 
check  should  be  lost  by  reason  of  its  arriving  at  C.  bank  later 
by  this  process  than  it  would  have  arrived  if  sent  according  to 
those  ordinary  requirements  of  the  common  law  which  govern 
the  relations  of  drawer  and  payee.  It  will  be  seen,  therefore, 
that  the  deposit  of  a  check  in  the  holder's  bank  for  collection 
may  in  a  certain  conjunction  of  circumstances  result  in  his 
total  loss  of  the  amount,  without  any  right  of  action  against 

2  Smith  V.  IMiller,  43  N.  Y.  176.     See  next  note. 

8  First  National  Bank  v.  Fourth  National  Bank,  77  N.  Y.  320;  89  id. 
412;  Bank  of  New  Hanover  v.  Kenan,  76  N.  C.  340. 
*  Rickford  v.  Ridge,  2  Camp.  537. 

437 


§  243  COLLECTION   IN   GENERAL. 

any  person  or  corporation  for  reimbursement.  Several  facts 
must  combine,  it  is  true,  to  produce  this  conjunction,  to  wit : 
first,  the  presentment  by  the  collecting  bank  to  the  drawee 
bank  for  payment  must  be  later  than  it  would  have  been  had 
the  ordinary  rule  of  presentment  as  between  drawer  and  payee 
been  followed  ;  second,  it  must  appear  that  the  check  would 
have  been  paid  had  it  been  presented  within  the  time  set  by 
this  rule,  or,  at  least,  that  the  bank  was  paying  during  that 
time,  and  that  the  drawer's  account  was  good  for  the  sum 
called  for ;  third,  payment  must  be  refused,  and  the  refusal 
must  be  by  reason  of  the  failure  of  the  bank  occurring  subse- 
quent to  such  time  and  before  actual  presentment,  or  by  some 
other  like  reason  beyond  the  control  of  the  drawer. 

§  242.  But  the  common  rule  giving  to  the  bank  the  whole 
of  the  day  following  its  receipt  of  the  check  is  liable  to  be  ma- 
Time  rule  terially  qualified  through  various  causes.  The  time 
varied.  ^y^y  |jq  shortened  or  extended,  either  (1)  by  ex- 

press instructions  given  by  the  depositor,  or  an  express  under- 
standing had  between  him  and  the  bank,  in  reference  to  the 
particular  transaction  ;  ^  or  (2)  by  the  uniform  course  of  deal- 
ing previously  pursued  between  himself  and  the  bank  in  the 
conduct  of  similar  business ;  or  (3)  by  the  known  usage  of  the 
individual  bank  in  such  matters,  provided  the  usage  is  one 
which  the  courts  can  properly  sustain ;  or  (4)  by  the  general 
usage  of  banks  and  custom  of  the  banking  business  in  the  city 
or  town  where  the  bank  is  situated. 

§  243.  Bank  liable  for  Loss  resulting  from  Failure  to  follow  the 
usual  Course.  —  The  customer  is  entitled  to  expect  and  require 
of  his  bank  that  it  shall  not  capriciously  or  needlessly  deviate 
from  the  established  system,  whatever  that  may  be  ;  and  if  it 
docs  so  deviate,  and  a  loss  is  the  result,  he  may  look  to  the 
bank  for  compensation.  For  example,  if  the  bank  neglects 
to  send  the  check  through  the  clearing-house  at  the  customary 
time  and  in  the  ordinary  manner,  and  elects  rather  to  keep  it 
till  a  later  hour  and  present  it  at  the  counter,  then,  if  it  would 

'  §242.  In  New  York,  "peculiar  circumstances"  toj^ether  ^^■ith  the 
knoioledge  and  concurrence  of  the  depositor  were  held  to  ju.stify  a  delay  in 
presentment  by  the  collecting  bank.     Jacobsohn  i'.  Belmont,  7  Bosw.  14. 
438 


ESTABLISHED    USAGE   PART    OF   THE    CONTRACT.  §  243 

have  been  paid  through  the  clcarhig-house  but  is  refused  at 
the  counter,  this  conduct  of  the  bank,  being  contrary  to  its 
wont  in  such  business,  will  render  it  liable  to  the  depositor  of 
the  check  for  its  amount.^  But  the  bank  must  always  make 
the  presentment  directly  to  the  drawee,  and  cannot  send  it 
through  otlier  banks  or  agents  of  any  description,  presentment 
through  the  clearing-house  being  for  this  purpose  a  present- 
ment direct  to  the  drawee.  There  can  be  no  real  necessity 
for  the  emi)loyment  of  any  intermediate  agencies,  where  the 
collecting  bank  and  the  drawee  bank  are  both  in  the  same 
place.  If  the  collecting  bank,  without  distinct  permission, 
sees  fit  to  have  recourse  to  them,  it  does  so  at  its  own  risk  of 
all  the  consequences  which  may  result.^  This  rule  of  course 
does  not  operate  to  abridge  the  rights  of  banks  to  make  any  of 
those  transfers  of  debits  and  credits  among  themselves  in  the 
course  of  clearing  which  usage  has  introduced  for  the  purpose 
of  facilitating  the  settlement  of  their  mutual  accounts  in  the 
most  convenient  manner. 

A  question  arising  as  to  the  custom  of  the  bankers  of  Lon- 
don in  presenting  checks  for  collection,  testimony  was  offered 
to  show  a  custom  of  "  all  London  bankers  east  of   ^ 

Custom. 

St.  Paul's  "  to  present  for  payment  upon  the  same 
day  on  which  they  receive  the  check.  Lord  Ellenborough 
rejected  this  testimony  very  contemptuously.  "  It  is  not  com- 
petent to  bankers  to  lay  down  one  rule  for  the  eastward  of  St. 
Paul's  and  another  for  the  westward.  They  may  as  well  fix 
upon  St.  Peter's  at  Rome."  ^ 

A  custom  will  not  be  binding  upon  a  party  who  has  no  reason 
to  anticipate  that  he  is  to  be  brought  within  its  operation. 
For  example,  where  an  indorsed  check  drawn  on  a  bank  in 
Albany  was  cashed  at  the  Mohawk  Bank  in  Schenectady,  and 
forwarded  thence  to  the  bank  in  Albany  for  collection,  the 
court  said  that  they  must  lay  out  of  the  question  certain  special 
findings  of  the  jury  as  to  the  usual  course  of  exchanges  between 

1  §243.  Boddington  v.  Schlencker,  4  B.  &  Ad.  752;  Alexander  v. 
Burchfield,  Car.  &  M.  75. 

2  Moule  V.  Brown,  4  Bing.  N.  C.  266;  5  Scott,  694. 
8  Rickford  v.  Ridge,  2  Camp.  537. 

439 


§  245  COLLECTION    IN   GENERAL. 

the  bank  at  Schenectady  and  the  bank  at  Albany.  Since  there 
was  "  no  pretence  that  this  check  was  drawn  or  indorsed  with 
a  view  to  its  being  negotiated  or  cashed  at  tlie  Mohawk  Bank, 
or  that  there  was  any  usage  of  trade  from  which  the  defend- 
ants had  reason  to  suppose  it  would  be  collected  through  that 
bank."* 

§  244.  The  Fundamental  Rule  underlying  all  the  decisions 
in  regard  to  time  of  presentment,  forwarding,  and  so  forth,  is 
that  reasonable  diligence  must  be  observed.  Upon  the  facts 
of  every  case,  then,  must  depend  the  actual  length  of  time  that 
is  to  be  considered  reasonable. 

Consequently,  where  the  question  comes  before  a  jury,  a 
diversity  in  decisions  may  be  expected  ;  it  can  only  be  said 
that  this  rule  of  presenting  or  forwarding  on  the  day  fol- 
lowing receipt  has  come  to  be  regarded  as  satisfactory  in  the 
majority  of  cases  where  no  circumstances  interfere  to  change 
the  rule.  In  New  York  it  has  been  held  that,  if  the  facts  are 
established  beyond  dispute,  the  question  whether  upon  them 
the  presentment  was  made  within  reasonable  time  becomes 
one  of  law  for  the  court.^ 

§  245.  "  Crossed  "  Checks  to  be  paid  only  as  the  Crossing 
directs.  —  In  England  it  has  been  intimated,  if  not  directly 
decided,  that  if  the  payee  of  the  check  had  stiimlated  with 
the  drawer  that  the  name  of  the  payee's  bankers  should  be 
"crossed  "on  the  check,  this  would  have  amounted  to  an 
Time  of  pre-  agreement  by  the  drawer  that  the  usual  course  of 
kr 'ed  b'  ^^'  pi'esentment  of  the  check  through  bankers  might  be 
crossing.  followed.  In  such  case,  if  this  method  involved  a 
delay  greater  than  the  law  ordinarily  allows  as  between  drawer 
and  payee,  the  former  would  nevertheless  not  be  acquitted  by 
the  failure  of  his  bankers  before  presentment,  though  they  had 
continued  to  pay  through  the  whole  period  of  time  which  the 
payee  would  otherwise  have  been  entitled  to  for  presentation.^ 

*  Mohawk  Bank  v.  Brodorick,  13  Wend.  133. 

1  §  244.  Mohawk  Bank  v.  Broderick,  13  Wend.  133 ;  Gough  v.  Staats, 

id.  549. 

1  §  24.5.  Alexander  v.  Burchfield,  Car.  &  M.  75;  3  Scott,  N.  R.  555; 

7  Man.  &  Gr.  1061. 

440 


CROSSED   CHECKS.  §  245 

In  this  country  the  system  of  "  crossed  checks,"  strictly  so 
called,  is  unknown.  But  of  late  the  germ  of  a  similar  cus- 
tom has  begun  to  manifest  itself.  Occasionally  checks  have 
stamped  or  written  upon  them  some  form  of  words  which  is 
intended  to  secure  their  payment  exclusively  through  the 
clearing-house.  No  especial  form  has  as  yet  been  generally 
accepted,  and  the  legal  effect  of  none  of  those  in  use  has  ever 
been  passed  upon.  It  is  safe  to  say,  however,  that  there  is  no 
question  but  that  the  drawer  could  embody  in  his  order  a 
direction  to  his  bank  to  pay  only  upon  presentation  of  the  in- 
strument in  the  usual  course  through  the  clearing-house,  and 
that  such  a  direction  would  be  as  valid  and  as  binding  upon 
the  bank  as  a  direction  to  pay  only  to  the  order  of  a  particu- 
lar person.  If  the  check  be  payable  to  the  order  of  A.  B.,  it 
is  probable  that  the  privilege  of  including  such  instructions  in 
his  order,  when  indorsing  over,  might  be  accorded  to  him ; 
certainly  indorsements  in  this  form  are  very  frequent,  and  no 
bank  would  be  safe  in  disregarding  them.  Supposing  the 
direction  to  be  properly  given,  the  collecting  and  the  paying 
bank  must  both  respect  it,  and  the  English  cases  above  men- 
tioned would  be  precedents  directly  in  force.  It  would  amount 
to  an  express  designation  by  the  drawer,  or  the  payee,  of  the 
manner  in  wiiich  alone  payment  is  authorized  to  be  demanded 
or  made. 

Bobbett  drew  a  check  on  his  banker,  M.,  payable  to  order, 
crossed  it  "  London  and  County  Bank,"  and  for  value  sent 
it  to  the  payee,  from  whom  it  was  stolen  and  his  indorse- 
ment forged.  Pinkett,  a  taker  in  good  faith,  ignorant  of  the 
forgery,  gave  it  to  his  country  bankers  ;  and  their  agent,  the 
London  and  Joint  Stock  Bank,  presented  and  received  pay- 
ment for  it  from  M.,  who  did  not  perceive  or  else  disregarded 
the  crossing.  P.,  on  hearing  that  it  was  paid,  gave  value  for 
it  to  a  customer.  Meanwhile  B.,  at  the  payee's  request,  had 
sent  him  a  second  check  for  the  same  amount,  which  was  also 
paid  by  M.,  and  B.'s  account  debited  with  both  checks.  In  an 
action  by  B.  against  P.  for  the  amount  of  the  first,  for  money 
had  and  received,  there  was  a  finding  thnt  P.  and  M.  and  the 
payee  had  been  guilty  of  negligence  as  to  the  payment.     Held, 

441 


§  24G  COLLECTION   IN   GENERAL. 

lliat  the  action  was  niaiutainablc.     M.'s  payment  to  a  banker 
otlier  than  the  one  named  in  the  crossin.ti'  was  improper.^ 

§  24(.i.  Initiation  of  Suits  and  Rights  of  Action.  —  Louisiana 
holds  that  the  scope  of  a  collecting  bank's  agency  does  not 
extend  to  the  initiation  of  suits  against  the  debtor  upon 
commercial  pa))er  of  which  payment  is  refused.^  Indeed, 
it  is  conceivable  that  the  bank  might  be  seriously  preju- 
diced by  the  institution  of  such  proceedings;  for  the  fact 
might,  under  some  circumstances,  be  evidence  going  to  show- 
that  the  bank  had  itself  adopted  the  paper,  and  therefore, 
whether  it  were  paid  or  not,  owed  the  amount  of  it  to  the 
original  holder. - 

A  note  given  in  charge  to  a  bank  for  collection,  and  so 
indorsed  as  to  place  the  apparent  and  technical  title  in  the 
bank,  if  not  withdrawn  after  noni)ayment  and  protest,  may 
be  sued  upon  by  the  bank  in  its  own  name,  liut  unless 
specially  so  instructed,  it  is  not  the  duty  of  the  bank  to  bring 
suit  under  such  circumstances.  It  would  seem,  therefore,  that 
its  doing  so  will  be  purely  a  gratuitous  undertaking  upon  its 
part,  for  which  it  might  perhaps  be  allowed  its  actual  and 
necessary  disbursements,  but  certainly  nothing  more  in  the 
way  of  compensation  for  its  trouble  in  attending  to  the  pro- 
ceedings.3 

But  in  New  York  (in  which  State  it  will  be  remembered 
that  it  is  held  that  the  first  bank  which  receives  paper  for 
collection  is  responsible  for  the  conduct  and  doings  of  all  sub- 
sequent banks  and  agents  through  whose  hands  the  paper 
must  pass  in  the  process  of  collection)  it  has  been  ruled  that 
this  first  bank  has  such  an  interest  in  the  pai)cr  as  to  give 
it  a  riglit  of  action  to  recover  full  damages  for  any  injury 

2  Bobbett  V.  Pinkett,  1  Ex.  1).  3G8  (187G).  Tlie  negotiability  of  a 
check  is  not  affected  by  21  &  22  Vict.  c.  79,  §  2,  which  enacts  that  the 
drawee  shall  pay  to  no  other  person  than  the  banker  named  in  the  cross- 
ing. Smith  V.  Union  Bank  of  London,  L.  R.  10  Q.  B.  291;  affirmed 
1  Q.  B.  I).  31  (1875). 

'  §  246.  Crow  v.  Mechanics  &  Traders'  Bank,  12  La.  An.  692;  Ryan 
f.  Mannfacturers  &  INIerchants'  Bank,  9  Daly,  308  (N.  Y.,  1880). 

2  iVetherill  v.  Bank  of  Pennsylvania,  1  Miles,  399. 

8  Sterling  v.  Marietta  &  Susquehanna  Trading  Co.,  11  Serg.  &  R.  179. 

442 


TAKING    CHECK    IN    PAYMENT.  §  247 

resulting  by  reason  of  any  default  on  the  part  of  any  subse- 
quent agent,  in  a  suit  against  such  agent,  although  no  steps 
have  been  taken  by  its  own  principal  to  hold  itself  liable  to 
respond  to  him  for  his  loss."*  Whether  or  not  this  principle 
would  be  sustained  in  States  which  do  not  hold  the  first  bank 
to  that  liability  to  which  it  is  held  in  New  York  is  perhaps 
doubtful,  though  certainly  very  improbable. 

In  Minnesota,  by  statute,  an  indorsement  to  "  B.  for  collec- 
tion "  gives  no  title  on  which  the  bank  can  sue.^  At  common 
law,  the  beneficial  owner  of  a  bill  to  bearer,  or  indorsed  in 
blank,  can  sue  in  the  name  of  any  real  party  who  will  allow 
his  name  to  be  used ;  and  the  maker  cannot  object  that  the 
plaintiff  is  not  the  real  party  in  interest.^ 

§  247.  Ouiy  Good  Money  to  be  received. — Except  by  agree- 
ment or  usage,  a  bank  has  no  right  to  take  anything  but 
money  in  payment  of  paper  it  holds  for  collection.  If  it 
takes  a  check,  it  is  agent  of  the  drawer  in  collecting  the 
check,  and  not  until  the  money  is  obtained  has  it  fultilled 
its  duty  as  agent  of  the  holder  of  the  paper.i  So  that  al- 
though it  has  had  such  check  certified,  and  has  credited  the 
amount  to  the  owner  of  the  paper  it  is  agent  to  collect,  yet 
if  it  becomes  insolvent  before  actually  receiving  the  money  on 
such  check,  the  owner  can  claim,  in  preference  to  the  general 
creditors ;  proceeds  received  subsequent  to  insolvency  being 
held  in  trust.^ 

{a)    Where  E.  had    for  two  years  frequently  sent   paper 
to  A.  for  collection,  and  nearly  always  received  in   Mode  of 
return,  not  money,  but  drafts,  drawn  by  the  mer-  ^'^-'^■'"S- 
chant  from  whom  the  collections  were  made,  E.  was  held  to 
be  prevented,  by  this  long  course  of  dealing,  from  recovering 
from  A.  on  account  of  a  draft  that  was  dishonored.^ 

4  Commercial  Banli  v.  Union  Bank,  19  Barb.  391 ;  1  Kern.  203. 
6  Rock  Co.  National  Bank  v.  Hollister,  21  Minn.  385. 
*  jNIorton  v.  Rogers,  14  Wend.  575. 
1  §  247.  Ward  v.  Smith,  7  Wall.  447.    See  next  note. 
-  Levi  V.  National  Bank,  5  Dill.  104;  German  American  Bauki'.  Third 
National  Bank,  IS  Alb.  L.  J.  252. 

3  New  York  Daily  Register,  Jan.  7,  1885. 

443 


§  247  COLLECTION   IN  GENERAL. 

(/')  If  a  bank  takes  a  new  note  for  the  one  it  is  engaged  to 
Substituted  collect,  and  then  becomes  insolvent,  this  substituted 
^^^^-  note  can  be  recovered  by  the  owner  of  the  first, 

but  the  receiver  cannot  be  compelled  to  pay  the  amount  of 
the  first  note.* 

(c)  When  the  holder  of  negotiable  pa^jcr  takes  a  check  in 
payment  of  it,  he  should  take  care  to  present  the  check  with 
such  diligence,  that,  if  it  is  not  paid,  he  may  re- 
the  liability  turii  it  to  tlic  drawcr  and  reclaim  the  bill  or  note 
tiir""he!ra  in  time  to  make  a  proper  demand  and  protest,  so 
tlkeli  in  pay-  as  to  preservc  the  liability  of  the  drawcr  and  in- 
""■"'■  dorsers.     For  example,  in  case  of  a  foreign  bill,  he 

would  have  to  present  the  check  the  same  day,  for  a  protest 
on  the  day  following  would  not  be  good.  In  case  of  an  ordi- 
nary draft  on  demand,  he  must  present  and  protest  before  the 
close  of  the  day  following  his  receipt  of  the  bill,  so  that  he 
may  preserve  the  liability  of  the  prior  parties  by  presenting 
the  check  he  took  in  payment  upon  the  same  day  if  it  was 
taken  the  day  following  his  receipt  of  the  draft,  or  upon  the 
day  succeeding  the  taking  of  it  in  payment  if  this  was  upon 
the  very  day  of  receiving  the  draft.^ 

A  bank  or  other  agency  may  in  the  same  way  preserve  the 
liability  of  former  parties  when  a  check  is  taken  in  payment 
of  paper  it  holds  for  collection ;  but  it  does  not  follow  that  it 
will  free  itself  from  all  responsibility  by  such  preservation  of 
liability,  for,  the  taking  of  the  check  in  payment  being  in 
excess  of  authority,  any  loss  that  results  will  have  to  be  borne 
by  the  agent,^  as  if  a  check  thus  taken  would  have  been  paid 
if  presented  the  same  day,  but  is  dishonored  the  next,  and 
although  the  liability  of  the  drawer  of  the  draft  is  preserved, 
yet  is  worthless  because  of  his  insolvency,  the  bank  is  liable 
to  the  holder.  It  is  the  bank's  duty  to  receive  only  money ; 
if  it  takes  a  check,  and  by  delay  in  presenting  it  loss  occurs, 

*  National  Bank  v.  Ellicott,  31  Kans.  173. 

5  Turner  v.  Bank  of  Fox  Lake,  3  Keyes,  425;  First  National  Bank  v. 
Fourth  National  Bank,  77  N.  Y.  320 ;  89  N.  Y.  412. 

«  Burkhalter  v.  Second  National  Bank,  42  N.  Y.  538;  Smith  v.  Miller, 
43  N.  Y.  171. 
444 


ONLY  GOOD  MONEY  CAN  BE  TAKEN.         §  "247 

it  is  liable.  If  the  check  was  worthless  when  it  was  given, 
or  became  worthless  before  it  could  be  presented  by  the  exer- 
cise of  reasonable  diligence,  and  the  bank  has  so  acted  as  to 
preserve  the  liability  of  former  parties,  no  loss  has  occurred 
by  negligence  in  taking  or  presenting  the  check.*^  But  if 
the  check  would  have  been  paid  if  presented  without  unrea- 
sonable delay,  yet  afterward  is  dishonored,  the  loss  is  clearly 
the  result  of  negligence. 

It  is  clearly  held  in  New  York,  that,  if  a  bank  takes  a  check 
in  payment  of  paper  it  holds  for  collection,  it  must  present 
the  check  the  same  day,  if  it  is  possible  by  reasonable  dili- 
gence ;  and  if  it  fails  to  do  so,  and  the  check  would  have  been 
good  on  that  day,  but  is  bad  on  the  next,  the  bank  is  liable.' 

A  bank  holding  a  check  for  collection,  and  having  it  certi- 
fied instead  of  demanding  payment,  becomes  liable  to  the 
owner  for  the  amount  of  the  check  with  interest  from  the 
date  of  certification.^ 

Where  the  principal  takes  the  check  from  the  collecting 
agent,  who  has  received  it  instead  of  money,  it  is  a 

P      ,  ,        ,       •      •        o  1  -J.    •       Ratification. 

ratitication  of  the   agent  s   deviation,'^  unless  it  is 
done  in  ignorance  of  some  material  fact  affecting  the  matter, 
as  if  the  drawer  of  the  check  had  failed  before  the  principal 
received  the  check.^^ 

(c?)  When  a  bank  is  employed  to  make  a  collection,  it  has 
no  authority  to  take  payment  in  any  description  of  depreciated 
currency,  even  though  the  same  may  constitute  the   „ 

''  '  "  ■'  Payment  m 

principal  currency  in  which  the  ordinary  transac-   depreciated 
tions  of  business  are  conducted  at  the  place.     If  it 
accepts  such  depreciated  currency,  it  is  nevertheless  liable  to 
pay  the  full  face  amount  to  its  principal  in  good  money.     The 
only  description  of  money  which  the  bank  is  justified  in  re- 
ceiving is  either  that   which   is  legal  tender,  or  bank  bills 

'  First  National  Bank  of  Meadville  v.  Fourth  National  Bank  of  New 
York,  IG  Hun,  332;  citing  Smith  v.  Miller,  43  N.  Y.  171 ;  s.  c.  52  N.  Y. 
545. 

*  Essex  Co.  National  Bank  v.  Bank  of  Montreal,  7  Biss.  193. 

9  Rathbun  v.  Citizens'  Steamboat  Co.,  76  N.  Y.  376. 

^0  Walker  i^.  Walker,  5  Heisk.  425. 

445 


§  248  COLLECTION    IN    GENERAL. 

which  are  actually  redeemed  on  presentment  at  the  counter 
of  the  bank  issuing  them  for  their  full  face  value  in  legal 
tender.i^  But  if  any  especial  circumstances  should  exempt  a 
bank  from  the  operation  of  this  rule,  and  should  justify  it  in 
receiving  current  funds,  though  depreciated,  then,  if  the  bank 
returns  these  specific  and  identical  funds  actually  received  by 
it  to  the  principal,  it  is  thereby  acquitted.  If,  however,  it 
gives  the  j)rincij)al  credit  for  them  generally  on  account,  then 
any  subsequent  depreciation  in  them  "which  may  take  place 
before  the  bank  makes  actual  payment  to  the  principal  will 
be  the  loss  of  the  bank.  Its  duty  is  to  account  to  tiie  prin- 
cipal, in  such  a  case,  for  the  full  real  value  of  the  funds 
received  by  it  for  the  collection  as  that  value  was  at  the  date 
of  the  collection. '2 

§  248.  Disposal  of  Proceeds.  —  After  the  collection  has  been 
made,  the  bank  becomes  a  simple  contract  debtor  for  the 
amount,  less  the  commission,  if  any  has  been  charged.  If  the 
party  for  whom  the  collection  is  made  is  a  regular  depositor, 
the  sum  will  be  ])roperly  placed  to  his  credit  upon  his  general 
deposit  account,^  unless  a  peculiar  usage  or  special  instruc- 
tions demand  some  different  course  of  dealing.  If  the  party 
has  no  deposit  account,  the  bank  simply  owes  him  the  amount 
on  demand.2  g^^^  jf  \^  chooses,  the  bank  may  credit  him  with 
it  as  if  it  were  an  ordinary  payment  on  deposit,  and  thus  initi- 
ate and  establish  the  relation  of  banker  and  depositor  between 
itself  and  him.  For  though  this  may  operate  to  place  the 
bank  under  obligations  and  duties  towards  him  which  would 
not  otherwise  have  existed,  yet  these  are  all  for  his  advantage, 
and  his  own  right  to  withdraw  the  whole  sum  instantly  upon 
demand  is  in  no  respect  altered,  if  he  does  not  wish  to  ratify 
the  option  of  the  bank  and  to  become  an  ordinary  depositor.^ 
In  Wisconsin  the  proceeds  are  always  held  in  trust.^ 

"  Ward  V.  Smith,  7  Wall.  447. 

J2  IMarine  Bank  v.  Fulton  Bank,  2  Wall.  252. 

1  §  248.  Marine  Bank  v.  Rushmore,  28  Til.  463. 

2  Tinkhami'.  Ilayworth,  31  111.  519;  Planters'  Bank  v.  Union  Bank, 
16  Wall.  483;  Duncan  i;.  :Magette,  25  Tex.  245. 

8  McLeod  V.  Evans,  28  N.  W.  Rep.  173. 

446 


PROCEEDS.  §  248 

If  the  bank  elects  to  retain  the  proceeds  as  a  special  de- 
posit, or  remit  them  at  once,  it  will  not  lose  in  case   oeprecia- 
of  depreciation  of  the   funds.     It  may  discharge   *'"!;, "I^"" 
itself  at  any  time  by  payment  of  the  specific  funds   collection. 
received,  but  if  it  credits  tlie  proceeds,  it  must  answer  for 
the  amount  credited  in  an  equal  amount  of  good  money  at 
the  time  of  demand,  and  so  will  lose  by  whatever  depreciation 
of  the  bank  bills  constituting  the  proceeds  may  have  occurred 
between  making  the  collection  and  paying  the  deposit.* 

(a)  After  a  bank  has  suspended,  it  ought  not  to  receive 
payments  upon  business  paper  previously  deposited  with  it  for 
collection ;  or  at  least  not  in  such  a  manner  that   ,     , 

Insolvency 

the  money  so  received  by  it  will  pass  into  its  gen-   revokes 
eral  assets,  and  the  owner  of  the  paper  will  be   credit  pro- 
placed  in  the  position  of  one  of  its  creditors,  enti-  ^^^  ^' 
tied  only  to  take  his  dividend.     The  subsequent  discharge  of 
the  bank,  in  bankruptcy  or  insolvency,  will  not,  it  is  said, 
bar  the  right  of  the  owner  of  such  paper  to  recover  in  full 
from  the  bank  the  amount  received  by  it.^     Proceeds  received 
after  the  bank  becomes  insolvent  are  held  in  trust,  and  may 
be  recovered  in  full.^ 

But  if  the  proceeds  are  collected  and  credited  before  in- 
solvency, the  owner  cannot  recover  in  preference  to  the  other 
creditors." 

And  even  though  a  check  has  been  sent  for  the  amount, 
it  will  not  avail  to  secure  the  owner  in  those  States  which 
refuse  to  recognize  a  check  as  an  assignment.^ 

And  if  the  proceeds  have  come  to  the  possession  of  a  bona 
fide  holder  for  value,  they  cannot  be  recovered,  as  where 
the   E.    Bank    received    in    good   faith   and   in    payment   of 

*  Marine  Bank  v.  Fulton  Bank,  2  Wall.  252 ;  Phoenix  Bank  v.  Risley, 
111  U.  S.  125. 

6  Tockusch  V.  Towsey,  51  Tex.  129. 

^  Haven's  Petition,  8  Bened.  309;  Levi  r.  National  Bank  of  Missouri, 
5  Dill.  10-1;  First  National  Bank  r.  First  National  Bank  of  Richmond,  76 
Ind.  561  (1881). 

T  Bank  v.  Russell,  2  Dill.  215;  People  v.  City  Bank,  93  X.  Y.  582. 

8  People  V.  ^Merchants  &  Mechanics'  Bank,  78  N.  Y.  269. 

447 


§  249  COLLECTION   IN   GENERAL. 

C.'s  debt  to   it,  the  proceeds   of  paper  intrusted  to   C.  for 
collection.^ 

(J)  If  a  negotiable  instrument  having  a  forged  indorse- 
ment come  to  the  hands  of  a  bank  and  is  collected  by  it, 
Proceeds  of  thc  procccds  are  held  for  the  riglitful  owners  of  the 
forged  paper,  paper,  and  may  be  recovered  by  them,  although  the 
bank  gave  value  for  the  paper,  or  has  paid  over  the  proceeds 
to  the  party  depositing  the  instrument  for  collection.^*' 

§  249.  "When  the  First  Bank  becomes  the  Customer's  Debtor 
—  The  theory  that  the  banks  and  agents  subsequent  to  the 
first  bank  are  independently  direct  agents  of  the  holder  of  the 
paper,  and  immediately  liable  to  him,  is  obviously  inconsistent 
with  holding  that  the  receipt  of  the  sum  due  by  any  subse- 
quent bank  is  in  law  the  receipt  by  the  first  bank,  and  at  once 
renders  the  first  bank  answerable  for  the  amount.  Yet  any 
feature  in  the  dealing  of  the  first  bank  with  any  of  the  parties, 
which  manifests  an  understanding  or  intention  on  the  part  of 
that  bank  to  adopt  the  receipt  of  the  subsequent  agent  as  be- 
ing its  own  receipt,  will  be  seized  upon  by  the  courts  as  a 
ground  for  holding  it  directly  answerable  to  the  depositor  of 
the  paper.  In  the  case  of  Mackersy  v.  Ramsay,^  elsewhere  fully 
stated,  there  appears  to  have  been  a  distinct  agreement  be- 
tween the  parties  that  the  first  bank  should  pay  the  depositor 
so  soon  as  it  was  notified  of  the  payment  having  been  actually 
made  to  the  correspondent  abroad.  In  Tabor  v.  Perrot  ^  there 
was  no  such  agreement ;  but  the  conduct  of  the  first  bank  in 
ordering  the  foreign  collecting  bank  to  give  it  credit  for  the 
sum,  and  in  drawing  bills  in  its  own  behalf  against  this  credit, 
was  regarded  as  constituting  a  complete  appropriation  of  the 
amount  to  its  own  use,  rendering  it  directly  responsible  to  the 
depositor  of  the  paper,  from  the  moment  that  the  credit  was 
given  to  it  in  accordance  with  its  order. 

8  Charlotte  Iron  Works  v.  American  Excliange  National  Bank,  34 
Ilun,  26. 

10  Boyce  r.  Brockway,  31  N.  Y.  490;  Talbot  v.  Rochester.  1  Hill,  295; 
Johnson  r.  First  National  Bank,  6  Ilun,  124;  Crandall  v.  Schroeppel, 
1  Ilun,  557. 

1  §  249.    9  Clark  &  F.  81 S.  ^  o  Gall.  565. 

448 


LIABILITIES   OF   THE   BANKS.  §  250 

Where  the  first  bank  pays  the  amount  of  the  paper  to  the 
depositor  under  the  belief,  arising  from  the  circumstances, 
that  its  correspondent  has  successfully  effected  the  collection, 
if  it  should  afterward  turn  out  that  the  collection  has  not  in 
fact  been  thus  effected,  such  bank  may  recover  back  from  the 
depositor  the  amount  so  paid  to  him,  on  the  ground  that  it 
was  a  payment  made  under  mistake  of  fact.  So  if  the  pay- 
ment was  made  by  any  bank,  other  than  the  collecting  bank 
itself,  to  its  predecessor  in  the  series  of  agents.^  In  the  courts 
of  New  York  and  of  the  United  States  the  first  bank  is  liable 
as  soon  as  the  money  is  paid  either  to  it  or  to  its  sub-agent.* 

§  250.  Liabilities  of  the  Various  Banks  directly  to  the  Owner. 
—  If  commercial  paper  is  deposited  in  a  bank  for  collection, 
and  is  by  that  bank  transmitted  to  any  other  bank  or  agent, 
or  through  any  series  of  banks  or  agents,  till  it  reaches  the 
possession  of  the  last  bank  or  agent,  whose  duty  it  becomes 
actually  to  make  the  collection,  can  the  bank  or  agent  actually 
making  the  collection  be  held  directly  by  the  owner  of  the 
paper  to  pay  the  amount,  less  charges  and  expenses,  to  him  ? 
If  his  demand  of  payment  is  refused,  without  sufficient  excuse, 
may  he  sue  the  bank  or  agent  ?  If  the  paper  is  transmitted 
through  several  banks,  is  each  one  of  them  directly  liable  to 
the  owner  for  its  prompt  and  accurate  forwarding  to  the  next 
bank  or  agent  ? 

Some  of  the  opinions  —  those  only  of  course  which  hold  that 
the  first  bank,  or  any  bank  in  the  series,  is  not  liable  for  the 
act  of  any  subsequent  bank  or  agent,  but  only  for   courts 
the  due  performance  of  the  especial  task  allotted   J^g'^rs^''^ 
to  itself  —  regard  each  bank,  and  the  notary  too,  if   l^^^^^j'^^'J^  |:^^; 
a  notary  is  emploved,  not  as  the  sub-agent  of  its   sub-agent 

''  1      «  1        j>         .     give  exclu- 

predccessor  or  of  the  first  bank,  but  as  the  direct   she  action 
agent  of  the  owner  of  the  paper,  for  the  purpose  of 
doing  the  precise  act  which  falls  to  its  share  in  the  chain  of 
proceeding.     Thus,  if  the  paper  is  transmitted  through  three 

8  Bank  of  Orleans  v.  Smith,  3  Hill,  560;  East  Haddara  Bank  v.  Scovil, 
12  Conn.  303;  Mechanics'  Bank  v.  Earp,  4  Rawle,  384. 

*  Hyde  v.  First  National  Bank,  7  Biss.  156.  See  Hoover  v.  Wise,  1 
Otto,  303;  Ayrault  v.  Pacific  Bank,  47  X.  Y.  570. 

VOL.  I.  29  449 


§  250  COLLECTION    IN   GENKRAL. 

banks  to  a  fourth,  which  has  to  collect,  and  is  by  that  fourth 
bank  delivered  to  a  notary  to  be  protested,  it  is  not  correct, 
according  to  the  doctrine  of  these  cases,  to  regard  the  second, 
third,  and  fourth  banks,  and  the  notary,  as  sub-agents  of  the 
first  bank,  neither  to  regard  the  notary  as  the  sub-agent  of  the 
fourth  bank.  But  each  successive  party  is  deemed  to  be  an 
independent  agent  directly  of  the  owner  of  the  paper,  having 
for  the  scope  of  its  agency,  in  the  case  of  any  one  of  the  first 
three  banks,  only  the  transmission  to  the  next ;  in  the  case  of 
the  fourth  bank,  the  collection,  or,  in  default  of  payment,  the 
delivery  to  a  proi)cr  party  for  protest ;  and  in  the  case  of  the 
notary,  the  various  acts  which  go  to  make  up  a  legal  protest.^ 
This  view  makes  the  owner's  right  of  action  exclusive;  the 
first  bank  having  no  right  to  sue  any  othcr.2  But  some  of 
Where  first  thc  othcr  class  of  cascs,  which  regard  all  the  subse- 
sjonsibierstiii  <l^ent  bauks  and  the  notary  as  sub-agents,  each  of 
the  owner       ^^    nredcccssor  and  all  of  the  first  bank,  allow  a 

niav  sue  the  " 

sub-agent  ell-  double   right   of   action   against   the   one   through 

rectlv,  if  he  „      ,      ,  r        l^  n      i 

sa  elects.  whose  default  loss  accrues  ;  tor  these  cases  declare 
that  the  defaulting  agent  may  be  sued  directly  by  the  owner 
of  thc  paper,  who  is  the  original  principal  in  the  whole  series ; 
and  at  the  same  time  it  is  a  necessity,  resulting  from  the  fact 
of  the  sub-agency,  that  suit  may  also  be  brought  by  that  first 
agent  who  stands  to  all  the  subsequent  ones  in  thc  relation  of 
an  immediate  principal.^  It  makes  no  difference  that  thc 
first  bank  is  regarded  as  liable  for  all  the  sub-agents.  This 
gives  the  owner  a  right  of  action  against  the  first  bank,  but 
does  not  deprive  him  of  the  collateral  right  to  sue  the  default- 
ing sub-agent  directly  and  primarily  if  he  wishes.  He  simply 
has  his  election  whether  he  will  pursue  his  remedy  against 
the  one  or  thc  other.* 

1  §  250.  Lawrence  v.  Stonington  Batik,  6  Conn.  521;  Mechanics'  Bank 
V.  Earp,  4  Rawle,  Z8i\  Reeves  v.  State  Bank,  8  Ohio  St.  4G5. 

2  Fanners'  Bank  v.  Owen,  5  Cranch,  C.  C.  504. 
8  Wilson  V.  Smith,  3  How.  U.  S.  703. 

4  Bank  of  Orleans  v.  Smith,  3  Hill,  5G0,  per  Nelson,  C.  J.,  who 
takes  pains  to  show  that  this  does  not  conflict  with  Allen  v.  Merchants' 
Bank,  22  Wend.  215.  In  New  York,  in  cases  where  the  collecting  bank 
is  held  liable  for  the  default  of  a  notary  employed  by  it,  the  measure  of 

450 


LIABILITIES   OF   THE   BANKS.  §  252 

Those  cases,  however,  which  hold  the  New  York  rule  with 
greatest  strictness,  and  carry  it  to  its  fullest  consequences, 
deny  the  right  of  the  owner  to  sue  the  sub-agent,^  except  that 
Avliere  the  transmitting  bank  becomes  insolvent  before  the 
agent  bank  receives  payment  of  the  note,  and  the  agent  bank 
has  not  acquired  a  right  to  the  note  or  its  proceeds  as  a  bona 
fide  holder  for  value,  the  owner  may  recover  the  note,  or  the 
proceeds  if  collected.     (§  565.) 

§  251.  Liability  to  the  Real  Party  in  Interest.  —  In  case  of 
any  default  on  the  part  of  any  bank  engaged  in  conducting 
the  collection,  whereby  it  would  ordinarily  lay  itself  open  to  a 
suit  by  the  party  who  deposited  the  paper  for  collection,  suit 
may  also  be  brought,  instead,  by  any  real  party  in  interest, 
though  his  name  was  not  mentioned  and  the  fact  of  his  inter- 
est was  entirely  unknown  to  the  bank  at  the  time  of  its  re- 
ceiving the  paper.  The  naked  fact  that  such  person  had  a 
real  beneficial  interest  in  having  the  l)ank  do  its  duty  in  the 
premises,  and  must  therefore  be  an  actual  loser  in  some  shape 
by  its  failure  to  do  so,  gives  the  right  of  action.^ 

§  252.  Causes  of  Liability.  —  If  a  bank  fails  to  do  its  duty 
in  the  matter  of  collection  with  reasonable  skill  and  care,-^  it 
is  liable  for  the  damage  resulting  ^  to  any  party  interested  in 
the  paper,  whether  his  name  appears  on  the  paper  or  not.^ 
It  will  be  no  defence  for  the  bank  to  assert  that  it  was  not 

damages  which  the  holder  of  the  paper  can  recover  from  the  bank  on  tlie 
ground  of  such  default  of  the  notary  is  the  amount  of  the  note  and  inter- 
est. If  the  holder  has  sued  an  iudorser,  and  has  failed  to  recover  by 
reason  of  the  default  of  the  notary,  he  cannot  increase  the  damages  by 
adding  the  expenses  of  the  suit.  For  the  action  against  the  bank  is  based 
upon  the  implied  undertaking  of  the  bank  to  give  the  notice,  and  not  upon 
any  false  representation  that  the  notice  has  been  duly  given.  Downer  v. 
Madison  City  Bank,  6  Hill,  618. 

5  Hyde  v.  First  National  Bank,  7  Biss.  150.  See  Hoover  v.  Wise,  1 
Otto,  308;  Ayrault  v.  Pacific  Bank,  47  N.  Y.  570. 

1  §  251.  McKinster  r.  Bank  of  Utica,  9  Wend.  46;  11  id.  473. 

1  §  252.  Fabens  v.  Mercantile  Bank,  23  Pick.  330. 

-  McKinster  i'.  Bank  of  Utica,  9  Wend.  46;  11  id.  473. 

3  The  measure  of  damages  will  be  the  amount  of  actual  loss  which  he 
has  sustained.  Bank  of  Washington  v.  Triplett,  1  Pet.  25;  INIcKinster  v. 
Bank  of  Utica,  9  Wend.  40;  Tyson  v.  State  Bank,  6  Blackf.  225. 

451 


§  252  COLLECTION   IN   GENERAL. 

accustomed  to  undertake  collections,  and  that  the  error  arose 
from  its  want  of  familiarity  with  the  ordinary  course  of  pro- 
ceedings. Having  undertaken  the  business,  it  is  liable  for  the 
results  of  an  improper  performance  of  it.*  It  has  been  already 
stated  that  the  bank  cannot  set  up  want  of  consideration.^ 

It  has  been  held,  also,  that  where  a  bank  demands  and  re- 
ceives payment  of  a  dishonored  note  from  an  indorser,  and  he, 
seeking  in  his  turn  to  recover  from  a  prior  indorser,  fails  to 
do  so  by  reason  of  a  default  by  the  bank  in  not  making  a 
proper  demand  upon  the  maker,  which  insufficiency  was  un- 
known to  the  paying  indorser  when  he  made  the  payment,  he 
shall  recover  back  the  amount  of  his  payment  from  the  bank. 

(rt)  If  the  paper  is  returned  to  it  by  its  correspondent  as 
uncollectible,  it  must  in  its  turn  promptly  send  the  paper 
iire"-uiar  back  With  this  information  to  the  owncr.^  If  it  is 
acceptance,  ^|^q  j^^^y  Qf  ^j^g  bank  to  procurc  the  acceptance  of  a 
draft  or  bill,  it  is  bound  to  procurc  an  absolute  and  outright 
acceptance,  legally  binding  upon  the  acceptor,  at  least  so  far 
as  concerns  the  form  and  circumstance  of  the  act  itself  of 
accepting.  If  it  takes  any  acceptance  which  is  irregular  in 
form,  and  which  therefore  fails  to  hold  the  party  drawn  u})on, 
and  rests  satisfied  with  this  without  at  once  notifying  its  prin- 
cipal, it  will  be  liable  itself  to  pay  the  amount  of  the  paper,  if 
otherwise  the  amount  would  be  lost  to  the  depositor  by  reason 
of  his  inability  to  hold  the  proper  party  as  acceptor."  If  the 
bank  takes  the  check  of  the  party  who  is  bound  to  pay  the 
paper,  and  thereupon  surrenders  the  paper  to  him,  it  assumes 
the  responsibility  for  the  check  proving  good.  If  it  is  not 
paid,  the  bank  is  still  obliged  to  pay  the  amount  to  the  person 
from  whom  it  received  the  paper.^ 

(/*)  But  if  the  bank  can  show  that  it  has  conducted  itself 
in  the  transaction  in  strict  accordance  with  the  customary 

*  Ivory  V.  Bank  of  State  of  ]Missouri,  36  Mo.  475. 
6  Halls  V.  Bank  of  the  State,  3  Rich.  306. 

•^  Van  Wart  v.  Woolley,  3  Barn.  &  Cres.  439;  Wingate  v.  ]\Iechanics' 
Bank,  10  Barr,  104 ;  McKinster  v.  Bank  of  Utica,  9  Wend.  46;  11  id.  473. 
^  Walker  v.  Bank  of  State  of  New  York,  9  N.  Y.  582. 
"  Commercial  Bank  v.  Union  Bank,  1  Kern.  203. 

452 


i 


CAUSES   OF   LIABILITY.  §  252 

and  established  mode  of  transacting  such  business,  it  seems 
that  this  might  suffice  to  acquit  it  of  all  responsibility  for  any 
mishap.     For  it  has  been  held  in  England  that  a  English 

,  .         -  ,      usage  to 

banker  who  gave  up  bills  indorsed  to  him  for  col-  take  ciieck. 
lection,  upon  receiving  the  acceptor's  check,  which  was  subse- 
quently dishonored,  could  not  be  charged  with  negligence 
because  the  transaction  was  not  an  unusual  one.^  It  may  be 
doubted  whether  it  would  free  a  banker  from  liability  if  he 
should  simply  show  a  frequent  habit  of  parting  with  paper 
upon  receiving  the  check  of  the  debtor ;  or  whether  he  would 
not  have  to  go  further,  and  show  positively  that  it  was  under- 
stood in  all  such  transactions  that  the  banker  discharged  his 
full  duty  to  his  customer  by  so  doing.  Otherwise,  the  usage 
might  amount  only  to  a  usage  of  bankers  to  assume  a  liabil- 
ity to  their  customers  in  such  cases. 

If  a  bank  fails  to  use  due  diligence  in  presenting  paper  for 
acceptance,  it  is  liable.^''  And  notice  of  dishonor  must  be 
duly  given,  even  though  the  presentment  for  acceptance 
which  resulted  in  the  dishonor  was  not  legally  requisite ;  for 
example  the  holder  of  a  draft  payable  at  a  future  day  is  not 
requirejd  to  present  it  for  acceptance,  but  if  it  is  presented, 
notice  of  the  dishonor  must  be  promptly  given  to  the  drawer 
or  indorser,  or  he  will  be  discharged.^^  See  §  258,  Duty  to 
present. 

(c)  Where  a  bank  fails  to  protest  a  draft  taken  in  part 
payment  of  paper  left  for  collection,  it  is  liable  Failure  to 
for  the  damage  consequent  on  its  negligence.^^  So  pj'otest. 
where  it  omitted  to  protest  a  draft  improperly  accepted  in 
such  a  way  as  to  bind  no  one  as  acceptor.i^  And  where  the 
instructions  were  "  to  return  at  once  without  protest  if  not 
paid,"  and  in  violation  of  this  order  it  was  kept  violation  of 
seven  days  though   not  paid,  and  then  returned,   instructions. 

9  Russell  V.  Hankey,  6  T.  R.  12. 

10  Allen  V.  Suydam,  20  Wend.  321;  Exchange  National  Bank  v.  Third 
National  Bank,  112  U.  S.  290. 

11  Walker  v.  Bank,  9  N.  Y.  582;  Bank  i-.  Triplett,  1  Pet.  25. 
1-  Capitol  State  Bank  v.  Lane,  52  Miss.  677. 

13  Walker  v.  Bank,  9  N.  Y.  582. 

453 


§  252  COLLECTION  IN  GENERAL. 

the  depositor  having  been  in  the  mean  time  paid  on  the 
representation  of  the  drawee,  who  was  also  president  of  the 
defendant  bank,  the  hitter  was  held  for  the  damage  resulting 
from  its  disobedience  of  instructions.^'^  This  case  does  not 
seem  very  strong.  The  loss  does  not  to  ordinary  vision  flow 
naturally  from  the  failure  to  obey,  but  from  the  negligence 
of  the  plaintiff  in  taking  the  word  of  the  drawee. 

(d)  A  bank  mailed  paper  it  had  received  for  collection  to 
the  drawee ;  it  miscarried,  and  the  drawee  failed  nineteen 
Failure  to  dnjs  after.  For  twenty-eight  days  after  sending  the 
inquire.  paper  the  bank  made  no  inquiry  about  it,  and  gave 
the  depositor  no  notice  concerning  it,  till  two  days  more  had 
elapsed.     The  bank  was  held  liable  for  its  ncgligence.^^ 

So  where  a  check  was  forwarded  by  the  depositary  on  the 
third,  and  in  the  regular  course  of  events  it  should  have  re- 
ceived on  the  fourth  word  of  its  arrival  but  did  not,  and  did 
not  know  until  the  IGtli  that  the  check  was  lost,  of  which  it 
notified  the  holder  on  the  18th,  the  bank  was  held  liable  for 
its  negligence  in  omitting  to  inquire  in  regard  to  the  check, 
whereby  loss  occurred,^^  the  drawee  having  funds  of  the 
drawer  until  the  20th. 

If  notice  is  actually  received  in  time  by  an  indorser  from 
any  source,  although  the  bank  was  negligent  and  did  not  send 
the  notice  it  should,  it  is  not  liable  for  such  neglect,  for  no 
damage  is  caused  by  it.^^ 

A  bank  failing  to  notify  the  depositor  of  a  check  upon  it- 
self of  the  nonpayment  of  the  same,  is  liable.^^ 

(<;)  A  letter  containing  a  bill  for  collection  slipped  through 
a  crack  in  the  cashier's  desk  at  the  bank,  and  remained  un- 
Negiigent  discovered  till  after  maturity.  The  court  said  that 
loss.  ii^Q  ],jj^  ^^.j^g  j^q|-  pi-escnted  in  the  sense  of  the  law, 

though  ])hysically  present  at  maturity,  and  the  acceptor  had 

^^  ]\Ierchants  &  jNIanufacturers'  National  Bank  v.  Stafford  National 
Bank,  44  Conn.  5G4  (U.  S.  Dist.  Ct.). 

15  Trinidad  National  Bank  v.  Denver  National  Bank,  4  Dill.  290. 
1^  Shipsey  v.  Bowery  National  Bank,  59  N.  Y.  485. 
"  Hallowell  v.  Curry,  41  Pa.  322. 
1**  Bank  of  New  llauover  v.  Kenan,  7G  N.  C.  340. 
454 


CAUSES   OF   LIABILITY.  §  255 

no  funds ;  that  the  loss  carried  with  it  the  presumption  of 
negligence  on  the  part  of  the  bank,  and  if  it  could  be  explained 
and  rebutted  the  facts  for  this  purpose  were  peculiarly  witliin 
the  knowledge  of  its  officers,  and  it  must  produce  them.^^ 
The  bank  was  held  liable  to  the  holder,  who  had  by  the  dis- 
appearance of  the  bill  lost  his  remedy  against  the  drawer  and 
indorser.  The  bank  as  agent  must  do  all  that  the  owner 
would  be  required  to  do  to  protect  his  rights,  and  is  liable  to 
the  owner  for  failure  in  such  duty.^*^ 

§  253.  Liability  for  Default  of  a  Branch.  —  Where  a  branch 
bank  was  negligent  in  not  serving  notice  of  dishonor  sent  to 
it  by  the  mother  bank,  the  latter  was  held.^ 

§  254.  When  the  Depositor  is  in  Fault.  —  If  the  rule  of  the 
bank  is  that  costs  of  protest  must  be  deposited  along  with 
paper  put  in  the  bank  for  collection,  and  in  consequence  of 
the  fact  that  this  is  omitted  the  bank  fails  to  protest  and  give 
notice,  it  is  not  liable,^  nor  is  it  responsible  for  the  miscarry- 
ing of  a  note  because  the  depositor  failed  to  give  the  correct 
address  of  the  bank  where  it  was  to  be  paid.^ 

Where  a  depositor  of  a  draft  for  collection,  which  is  cred- 
ited to  him,  knows  of  the  failing  condition  of  the  drawee  and 
does  not  impart  his  information,  the  bank  is  discharged  from 
liability.3 

§  255.  Mistakes  of  Fact.  —  If  a  bank  mistakes  the  date  of  a 
note  and  presents  it  for  collection  too  soon,i  or  sends  notice  to 
the  wrong  person,  though  one  of  the  same  name  as  the  real 
indorser  but  living  in  a  different  county ,2  it  is  liable  for  the 
loss  resulting. 

Where  a  bank  mistook  a  note  that  was  really  negotiable  for 
a  non-negotiable  one,  (because  it  contained  provisions  beyond 

19  Chicopee  Bank  v.  Philadelphia  Bank,  8  Wall.  641. 

20  Davey  v.  Jones,  42  N.  J.  Law,  30;  Beale  v.  Pavrish,  20  N.  Y.  407. 
1  §  253.  Bird  v.  Louisiana  State  Bank,  93  U.  S.  96. 

1  §  254.  Pendleton  v.  Bank,  1  T.  B.  Men.  171  (Ky.). 

2  Chapman  v.  Union  Bank,  32  How.  Pr.  95. 

3  Freeholders  of  Middlesex  v.  State  Bank,  32  N.  J.  Eq.  467. 

1  §  255.  Bank  of  Delaware  Co.  v.  Broomhall,  38  Pa.  St.  135. 

2  Mount  V.  First  National  Bank,  37  Iowa,  457;  Borup  v.  Nininger,  5 
Minn.  523. 

455 


§  256  COLLECTION   IN   GENERAL. 

those  usually  found  in  notes,  saying,  "  being  in  part  payment 
for  a  portable  engine,  which  engine  shall  be  and  remain  the 
property  of  the  owner  of  this  note  until  the  amount  hereby 
secured  is  fully  paid,")  and  did  not  properly  ])rutcst  and 
notify,  it  was  held  responsible.'^ 

A  bill  of  exchange  was  sent  to  a  bank  for  collection.  The 
bank  thought  it  was  a  check,  and  not  entitled  to  grace,  and 
presented  and  protested  it  on  the  day  of  maturity.  This  dis- 
charged the  indorser,  and  the  bank  was  held  to  make  good  the 
loss.*  The  indorser,  in  this  case  had  notified  the  bank  that 
the  instrument  had  grace,  which  strengthened  the  case  against 
the  bank. 

A  mere  nominal  error,  not  calculated  to  mislead,  or  which 
does  not  in  fact  mislead,  is  not  fatal,  as  where  a  draft  was 
signed  Burton  and  Sowlcs,  and  notice  was  addressed  0.  A. 
Burton,  and  under  it  Edward  A.  Sowles,  although  not  accurate, 
it  was  held  sufficient.^ 

If  the  collecting  bank  has  knowledge  of  the  address  of  a 
party  to  be  notified,  it  must  impart  it  to  its  agent  or  notary .^ 
But  it  is  not  required  of  the  owner  that  he  shall  send  the 
address  of  an  indorser  known  to  him  to  the  bank,  w^ith  a  note 
deposited  for  collection.  If  the  agent  and  the  notary  use 
due  diligence,  and  cannot  discover  the  address,  the  bank 
can  send  the  notice  to  the  owner,  and  he  may  forward  it, 
and  if  the  agent  and  notary  use  proper  care  and  come  to  the 
conclusion  that  a  party's  address  is  M.,  and  send  notice  there, 
such  notice  is  sufficient,  though  never  received,  the  real  ad- 
dress being  X.,  and  the  owner  plaintiff  having  knowledge  of 
this  fact.'' 

§  256.  Mistake  of  Law.  —  Generally  a  mistake  of  law  is  no 
excuse,  but  when  a  question  has  not  yet  been  decided,  and 
there  is  no  uniform  practice  to  guide  the  bank,  it  is  not  re- 
sponsible for  mistaking  ivhat  will  he  the  future  decision  of  the 

8  Mott  r.  Havana  National  Bank,  22  Ilun,  35J. 

*  Georgia  National  Bank  v.  Henderson,  46  Ga.  487. 

6  United  States  National  Bank  v.  Burton,  58  Vt.  426. 

«  Bartlett  v.  Isbell,  31  Conn.  296  ;  Borup  v.  Nininger,  5  Minn.  552. 

'  Ransom  v.  Mack,  2  Hill,  502;  Belden  v.  Lamb,  17  Conn.  441. 

456 


LIABILITY    FOR    MISTAKE.  §  258 

law  ;  it  is  only  the  law  that  is  established  that  is  presumed  to 
be  known.  A  post  note  was  presented  and  notice  given  on  the 
day  of  maturity;  this  discharged  the  indorsers.  The  question 
whether  a  post  note  shall  have  grace  or  not  being  doubtful, 
no  uniform  usage  existing  and  the  law  not  having  been  estab- 
lished by  decision,  the  bank  was  not  responsible.^ 

§  257.    A  Brief  Statement  ^  of  the  General  Principles  of  the   Law^ 
Merchant,  regarding,  — 
§  258.   Presentment  for  Acceptance. 
§  259.    Presentment  for  Payment. 
§260.    Protest. 

§  261.   Notice  of  Dishonor,  and 
§§  262,  203.    Excuses  for  Failure  to  Present  or  Notify. 

§  258.  Presentment  for  Acceptance.—  («)  What  Paper;  (J>)  When; 
(c)  Where;  (r/)  By  whom;  (e)  To  whom;  (/)  How;  {(j)  Effect  of;  and 
(/*)  Failure,  its  Excuse  and  Eifect. 

(a)  What  Paper.  —  All  bills  payable  at  sight  or  after  an  uncertain 
event,  as  after  sight  or  demand,  must  be  presented  for  acceptance  without 
unreasonable  delay,  unless  they  contain  a  waiver  ("  acceptance  waived  "). 
Bills  payable  on  demand,  or  a  certain  time  after  a  fixed  date,  need  no 
presentment  for  acceptance;  but  when  payable  at  a  future  day  it  is  usual 
to  present  for  acceptance  with  diligence,  because,  if  accepted,  the  ac- 
ceptor's liability  is  assured,  if  not,  the  holder  must  protest  and  notify, 
and  has  an  immediate  right  of  action  against  the  drawer  and  indorsers. 
And  if  there  is  an  express  direction  to  present  given  to  the  payee  or 
holder  of  a  bill  payable  at  a  fixed  time,  or  if  it  is  put  into  the  hands  of 
an  agent  to  negotiate,  it  must  be  presented  for  acceptance. 

(?;)  When.  —  During  business  hours,  within  a  reasonable  period  after 
the  bill  is  received,  taking  into  account  the  means  of  communication,  the 
fluctuations  in  the  rate  of  exchange,  the  putting  of  the  bill  into  circula- 
tion (delay  of  a  year  might  not  be  negligent  if  the  bill  were  in  circula- 
tion), and  any  other  circumstances,  as  war,  sickness,  or  accident,  which 
in  common  reason  affect  the  question. 

Of  course,  presentment  for  acceptance  must  be  previous  to  the  day  on 
which  the  paper  is  due,  or  it  is  merged  in  presentment  for  payment. 

1  §  256.   Mechanics'  Bank  v.  Merchants'  Bank,  6  Met.  13. 

1  §  257.  So  far  as  not  verified  in  the  chapters  on  Collection  and  Checks, 
these  rules  are  easily  found  in  the  standard  books,  as  Daniel  on  Negotiable 
Instruments,  Parsons  on  Bills  and  Notes,  or  Sliarswood's  Byles.  The  object 
here  is  to  give  in  a  very  condensed  form  the  essence  of  Presentment,  Protest, 
and  Notice,  for  easy  reference  and  a  bird's-eye  view  of  matters  a  comprehen- 
sion of  which  is  necessary  to  an  understanding  of  banking  cases. 

457 


i5 


259  COLLECTION    IN    GENERAL. 


Business  hours,  if  the  paper  is  payable  at  a  bank,  mean  its  banking 
hours;  if  not  at  a  particuhir  bank,  but  generally  "at  bank,"  the  usual 
bankine  hours  of  the  phice  of  payment;  if  at  any  other  "place  of  busi- 
ness," the  hours  during  which  such  places  are  usually  open ;  in  other  cases, 
business  hours  continue  till  the  hours  of  rest  usual  in  the  community. 

Presentment  is  always  sufficient  if  it  is  properly  responded  to. 

If  the  drawee  of  a  bill  is  not  at  his  house  or  counting-room,  the  holder 
may  wait  a  reasonable  time  for  his  return;  a  call  next  day  has  been  held 
reasonable. 

(c)  Where.  — Presentment  for  acceptance  must  be  made  at  the  dwell- 
ing or  the  place  of  business  of  the  drawee,  without  regard  to  the  place  of 
payment,  and  this  although  the  drawee  has  removed  his  domicil  from 
the  place  to  which  the  bill  is  addressed. 

(f/)    By  Whom.  —  The  holder  or  his  authorized  agent. 

(e)    To  Whom.  —  The  dra\Tee  or  his  authorized  agent. 

(y)  Hoio.  —  The  presenter  should  actually  exhibit  the  bill  to  the 
drawee,  though  the  drawer  and  indorsers  may  be  bound  without  such 
formality,  if  the  drawee  is  able  to  and  does  give  an  intelligent  answer  as 
to  acceptance  of  it  from  knowledge  previously  acquired. 

([/)  Effect.  —  (1)  If  accepted,  the  drawee  becomes  liable  for  the 
amount,  the  acceptance  operates  as  a  legal  assignment  of  the  amount  to 
the  holder,  if  the  drawing  of  the  bill  did  not  have  that  effect.  (2)  If 
not  accepted,  the  holder  must  protest  and  notify  the  drawer  and  indorsers, 
and  then  may  sue  them  without  waiting  until  the  maturity  of  the  paper; 
and  if  a  State  law  forbids  suit  till  maturity,  the  United  States  courts 
will  not  be  affected  by  the  statute,  the  question  being  one  of  general 
commercial  law,  and  well  settled  beside. 

(li)  Failure,  Excuse  for.  —  (1)  When  the  drawing  of  the  bill  is  a  fraud 
on  the  holder.  (2)  When  the  residence  of  the  drawee  cannot  with  rea- 
sonable diligence  be  discovered,  the  bill  may  be  treated  as  dishonored. 

Effect  of  unexcused  failure  to  present  properly  is  to  destroy  the 
holder's  remedy  on  the  bill,  and  also  on  the  debt  for  which  the  bill  was 
received. 

§  259.  Presentment  for  Payment.  —  {a)  When ;  (h)  Where ;  (c)  By 
Whom;  {d)  On  Whom;  (e)  How. 

(a)  When.  —  Within  business  hours,  according  to  the  custom  of  the 
place  where  payable.     See  above.     As  to  the  day, — 

1st.  A  bill  or  note  payable  at  a  fixed  time  must  be  presented  on  the 
day  of  maturity.  One  day  before  or  after  is  of  no  effect  to  charge  the 
drawer  or  indorser. 

2d.  As  to  the  maker  of  a  note  or  acceptor  of  a  bill,  (1)  if  payable  at 
a  particular  place,  presentment  should  be  on  the  day  of  maturity,  for  if 
not,  the  holder  will  have  to  make  good  any  loss  to  the  maker  or  acceptor 
resulting  from  the  delay;  (2)  otherwise,  demand  of  payment  at  any  time 
during  the  running  of  the  statute  of  limitations  is  sufficient. 

458 


PRESENTMENT    FOR   PAYMENT.  §  -iO'J 

3d.  Bills  payable  on  demand  must  be  presented  during  business  hours 
on  the  next  business  day  following  their  delivery,  if  the  drawee  Is  in  the 
same  place  as  tlie  payee  ;  if  in  a  different  place,  they  must  be  sent  by  the 
regular  mail  of  the  day  following  receipt  to  some  one  in  the  place  of 
the  drawee,  and  the  person  to  whom  it  is  sent  has  the  secular  day  follow- 
ing the  one  in  which  the  paper  has  reached  him  by  due  course  of  mail 
in  which  to  present  it.  This  is  the  general  rule  as  to  reasonable  time  in 
such  cases,  but  circumstances  may  vary  it. 

4th.  Checks  (1)  as  between  drawer  and  payee  must  be  presented  for 
payment  in  accordance  with  the  rule  given  in  the  last  paragraph,  or  the 
drawer  will  be  discharged  to  the  extent  of  the  damage  caused  to  him  by  the 
delay,  but  no  further.  (2)  As  to  an  indorser,  the  indorsement  is  considered 
a  new  drawing,  and  the  same  time  rule  holds,  but  with  a  difference  in  the 
effect  if  pi-esentmcnt  is  not  made  within  the  said  time.  An  indorser  is 
entirely  discharged  by  such  failure.  (3)  As  between  drawer  and  any 
indorsee  or  holder,  the  i^resentment  must  be  made  within  the  same  time 
as  it  would  have  to  be  by  the  payee  himself,  and  with  the  same  effect  in 
case  of  failure.  That  is,  the  drawer  is  absolutely  resi^onsible  only  during 
the  day  following  receipt  of  the  check  by  the  payee,  or  by  his  agent,  to 
whom  it  is  duly  forwarded  as  above,  and  no  matter  how  many  times  the 
check  may  be  indorsed  or  transferred,  this  time  cannot  be  enlarged. 

5th.  Note  payable  on  demand  is  regarded  by  the  best  writers  as  a  con- 
tinuing security,  especially  if  given  for  a  loan  or  payable  "  with  interest," 
and  the  rules  of  the  last  two  paragraphs  do  not  apply;  but  it  will  be  a  ques- 
tion for  the  jury  on  all  the  facts  whether  the  presentment  was  reasonable 
or  not.  (Sharswood's  Byles,  388.)  The  authorities,  however,  are  in  irrec- 
oncilable conflict,  and  the  question,  when  it  arises  in  any  particular  State, 
should  be  examined  in  the  light  of  the  decisions  in  that  State. 

6th.  Grace.  (1)  Non-negotiable  paper  has  no  grace.  (2)  Bills  payable 
"  at  sight  "  are  the  subject  of  great  conflict.  The  weight  of  authority  is 
in  favor  of  grace;  reason  is  not  involved;  it  is  a  mei'e  matter  of  formal 
law,  which  may  be  settled  equally  well  either  way,  the  only  thing  of  im- 
portance being  to  settle  it.  (3)  All  other  bills  of  exchange  and  negotiable 
notes  have  grace,  except  those  expressly  payable  without  it  and  those 
payable  on  demand  or  ih  which  no  time  is  named  (in  the  last  case  the 
law  implies  that  they  are  on  demand).  (4)  Three  days'  grace  is  the 
usual  rule,  but  it  may  be  varied  by  local  usage,  or  by  statute,  enlarging, 
diminishing,  or  entirely  cutting  it  off. 

7th.  The  fundamental  rule  is  that  presentment  must  be  made  in  reason- 
able time  under  all  the  circumstances,  and  the  above  are  merely  cases  in 
which  the  law  has  determined  what  shall  be  considered  reasonable  time 
in  those  circumstances.     See  Excuse. 

{b)  Where.  —  (1)  If  the  paper  names  a  place  of  payment,  presentment  for 
payment  must  be  made  there.  (2)  If  several  places  are  named,  the  holder 
may  elect,  and  a  presentment  at  either  is  good.     (3)  When  no  place  of 

459 


§  259  COLLECTION    IN   GENERAL. 

payment  is  named,  the  place  of  dating  is  prhna  facie  the  seat  of  the  con- 
tract; but  the  real  place  of  performance,  controlling  the  place  of  date 
except  as  to  bona  Jide  parties  for  value  without  notice,  is  the  place  of 
delivery,  as  to  the  State  whose  law  is  to  govern  the  contract.  As  to  the 
particular  house  or  spot  at  which  demand  should  be  made,  if  under  the 
principles  of  private  international  law,  the  place  of  performance  is  in 
the  State  where  the  maker  or  acceptor  has  his  domicil,  and  the  paper  is 
payable  generally,  demand  should  be  made  at  his  place  of  business  or 
residence  (whether  he  is  there  or  uot  it  is  good),  or  upon  him  personally 
(demand  on  the  street  or  in  the  barn-yard  has  been  held  good).  So, 
if  between  the  time  a  note  is  made  or  a  bill  accepted,  and  the  maturity 
of  the  same,  the  maker  or  acceptor  removes  into  another  State,  the 
holder  is  not  obliged  to  go  out  of  his  State  in  order  to  make  demand 
at  the  new  domicil,  but  may  fulfil  his  duty  by  making  demand  at  the 
payor's  last  residence  or  place  of  business  in  that  State.  If  the  re- 
moval is  to  another  place  in  the  same  State,  the  holder  must  follow  to 
that  place. 

(c)  By  Whom.  —  Any  bona  Jide  holder,  or  his  agent  duly  authorized 
(by  parol  or  writing),  may  demand  payment;  for  example,  a  notar3\ 

If  the  holder  is  dead,  his  personal  representatives  or  their  authorized 
agent  may  present. 

(i-/)  On  Wliom.  —  Presentment  for  payment  should  be  made  to  the 
j)arly  who  is  to  pay,  or  to  his  authorized  agent.  It  is  his  duty  to  provide 
some  one  to  attend  to  his  business,  and  demand  on  his  clerk,  or  wife,  or 
other  person  most  likely  of  those  present  at  the  place  of  demand  to  be 
his  agent  for  such  purpose,  is  sufficient  in  his  aUsence.  And  if  no  one  is 
found  at  the  place  of  payment,  the  paper  may  be  treated  as  dishonored. 

If  there  are  several  joint  promisors  not  partners,  demand  should  be 
made  upon  each. 

If  the  joint  promisors  are  partners,  demand  on  any  one  is  enough, 
even  though  the  firm  is  dissolved. 

If  the  payor  is  dead,  demand  .should  be  made  upon  his  personal  repre- 
sentative, if  one  has  been  appointed;  if  not,  then  at  the  proper  p/ace,  and 
the  bill  treated  as  dishonored. 

(e)  How.  —  The  bill  or  note  must  be  in  possession  of  the  party  making 
demand,  and  ready  to  be  delivered,  and  this  fact  must  be  clearly  indi- 
cated to  the  maker,  drawee,  or  acceptor  (which  is  best  done  by  actual 
exhibition  of  it,  which  the  party  who  is  to  pay  has  a  right  to  demand  in 
order  that  he  may  be  assured  that  he  is  paying  to  the  proper  person,  and 
that  the  paper  will  be  delivered  to  him  on  payment).  But  any  circum- 
stance which  renders  this  manner  of  presentment  useless  excuses  its 
absence,  as  if  the  payor  refuse  to  honor  the  demand  on  other  grounds. 

When  a  bill  or  note  is  payable  at  a  particular  place,  as  a  business  house 
or  at  a  bank,  it  i.s  sufficient  demand  if  the  paper  is  present  in  the  bank 
at  the  proper  time. 

460 


PROTEST.  §  260 

§  2G0.  Protest,  or  formal  steps  taken  to  fix  tlie  liability  of  drawer  or 
indorser,  and  supply  reliable  evidence  of  dishonor.  —  («)  What  Paper; 
(/;)  AVhen;  (c)  Where;  (d)  By  Whom;  (c)  How. 

(rt)  What  Instruments.  —  In  England  and  the  United  States  the  general 
rule  is  tliat  only  in  case  of  foreign  bills  is  protest  necessary,  but  in  many 
States  statutes  provide  that  inland  bills  and  promissory  notes  may  be 
protested;  and  it  has  been  held  at  common  law  that  there  is  no  good 
reason  for  making  a  distinction  between  foreign  bills  and  notes  payable 
in  another  State  which  have  been  indorsed. 

A  check  drawn  in  one  State  and  payable  in  another  is  a  species  of 
foreign  bill,  and  should  be  protested  to  charge  an  indorser,  and  inland 
checks  may  be  protested  under  the  statutes  above  mentioned  as  inland 
bills. 

(6)  When.  —  (1)  Protest  should  be  made  when  the  instrument  above 
named  as  requiring  it  is  dishonored  by  non-acceptance  or  non-payment. 
(Absence  from  residence  or  place  of  business,  leaving  no  one  to  pay,  is 
dishonor  in  case  of  presentment  to  acceptor  for  payment;  but  absence 
when  a  bill  is  presented  for  acceptance  is  no  dishonor,  for  the  drawee  may 
have  had  no  notice  of  the  bill.  If  a  bill  has  been  presented  for  accept- 
ance and  refused,  no  presentment  for  payment  or  protest  for  nonpay- 
ment is  necessary  except  in  case  of  acceptance  supra  protest.)  (2)  The 
"  noting  "  must  be  done  upon  the  day  of  maturity  of  the  paper;  but  the 
"extension"  or  complete  certificate  of  protest  may  be  filled  out  at  any 
subsequent  time.     (See  "  How  "  below.) 

(c)  Where.  —  For  non-acceptance,  it  shoiild  be  at  the  place  of  present- 
ment for  acceptance.  For  nonpayment,  it  should  be  at  the  place  of 
payment. 

(d)  By  Whom.  —  It  should  be  made  by  a  notary  public  if  one  can  be 
found,  otherwise  by  some  respectable  person  of  the  place  where  the  paper 
is  dishonored,  with  proper  witnesses,  though  the  latter  are  probably  not 
necessary. 

(e)  Hovj.  —  (1)  The  bill  or  note  must  be  presented  for  acceptance  or 
payment,  as  the  case  may  be,  hy  the  notary  (or  other  person  making  the 
protest)  in  person  (so.  that  his  testimony  may  not  be  hearsay).  (2)  Dur- 
ing the  very  day  on  which  the  presentment  is  made  by  him,  he  must 
"note  the  protest,"  i.  e.  make  a  minute  on  the  bill  or  in  his  book  of 
registry,  consisting  of  the  date,  the  refusal,  the  charges  of  protest,  and 
his  initials.  (3)  The  "extension  "  or  complete  certificate  of  protest  may 
be  made  at  any  time  from  a  "  noting  "  properly  made  on  the  day  of  ma- 
turity of  the  paper.  (4)  The  certificate  should  state  the  time,  place,  and 
manner  of  presentment,  to  whom  and  by  whom  it  was  made,  and  the 
facts  of  demand  and  dishonor.  (It  is  also  usual  to  state  the  reasons  given 
for  refusal,  and  the  name  of  the  party  ordering  protest;  but  these  are  not 
essentials.)  (5)  The  certificate  should  be  authenticated  by  the  notarial 
seal;  courts  take  judicial  note  of  this,  and  such  seal  is  prima  facie  &V\- 

461 


^  lib!  COLLECTION   IN   GENERAL. 

dence  of  the  authenticity  of  the  certificate.  If  not  under  notarial  seal,  it 
must  be  proved  that  the  certificate  was  properly  made,  and  that  it  is 
sufficient  without  seal  in  the  State  where  made.  (0)  The  certificate  is 
primn  facie  evidence  of  the  facts  stated  in  it  so  far  as  they  come  within 
the  notary's  official  duty  in  making  presentment,  demand,  and  protest. 
See  (4).     Giving  notice  is  not  within  this  scope. 

§261.  Notice  of  Dishonor.  —  (a)  When;  {h)  By  Whom;  (c)  To 
AVhom;   {d)  How  and  What. 

(«)  When.  —  (1)  The  act  to  be  done  by  the  notifier  may  be  done  at 
once  after  dishonor,  without  waiting  till  the  close  of  business  hours  on 
the  day  of  payment.  (2)  But  notice  given  or  sent  before  dishonor  is  pre- 
mature. (3)  Personal  notice  may  be  given  at  any  time  up  to  the  close  of 
the  day  after  dishonor  and  before  the  close  of  business  hours,  if  given  at 
the  place  of  business;  or,  if  at  the  dwelling,  then  any  time  before  the  usual 
hours  of  rest.  (4)  Notice  by  mail  must  be  deposited  in  time  to  go  by  some 
mail  of  the  next  business  day  following  dishonor,  unless  there  is  no  mail  that 
day  or  the  only  mail  is  closed  before  early  and  convenient  business  hours 
of  that  day  (seven  o'clock  being  the  probable  time),  in  which  cases  the 
letter  must  be  put  in  the  office  in  time  for  the  next  mail  after  the  said  day 
following  dishonor.  Kent  says  it  is  enough  to  mail  the  letter  on  said 
day  following,  though  not  in  time  to  go  by  any  mail  of  that  day;  but  the 
weight  of  authority  is  against  him.  See  Daniel,  §  1040;  1  Parsons, 
N.  &  B.  508;  3  Kent,  lOG.  (5)  Each  party  who  receives  notice  has  the 
period  named  in  (4)  to  send  notice  to  his  predecessors,  measuring  the 
period  not  from  dishonor,  but  from  the  time  of  receiving  notice  himself, 
with  the  proviso  that  notice  received  on  Sunday  or  other  non-business 
day  is  considered  as  received  upon  the  next  business  day,  and  need  not 
be  opened  until  then. 

(1))  By  Whom.  —  (1)  Notice  must  be  given  by  the  holder,  or  by  some 
party  whose  liability  lias  been  fixed,  or  by  the  agent  of  such  a  person. 
(If  the  holder  notifies  the  fourth  indorser,  and  he  the  third,  and  so  on, 
the  notices  all  enure  to  the  benefit  of  the  holder;  and  if  the  holder 
notifies  all  tlie  indorsers,  and  the  third  pays  the  holder,  such  third  in- 
dorser is  substituted  to  the  riglits  of  the  holder,  and  may  recover  of  the 
second  or  first  indorser,  though  the  third  had  not  sent  any  notices  him- 
self. Such  is  the  best  opinion.)  (2)  A  stranger,  or  a  party  who  has 
been  discharged  from  all  liability  on  the  paper,  cannot  notify,  and  rati- 
fication will  not  make  his  act  good.  (3)  If  the  holder  is  dead,  his 
representative  should  attend  to  giving  notice. 

(c)  To  Wlwm.  —  A.  (1)  The  party  primarily  liable,  the  maker  of  a 
note  or  acceptor  of  a  bill,  is  not  entitled  to  notice  of  dishonor ;  it  is  his 
duty  to  provide  for  payment  anyway.  No  party  to  non -negotiable  paper 
has  a  right  to  notice.  The  protection  of  these  rules  of  mercantile  law 
has  been  extended  as  yet  only  to  the  favorites  of  commerce.  One  who 
transfers  paper  by  mere  delivery,   without   indorsement,  as  collateral 

462 


NOTICE   OF   DISHONOR.  §  2G1 

security,  is  not  entitled  to  notice,  and  will  not  be  released  from  the  debt 
secured,  except  so  far  as  he  can  show  that  he  has  been  damaged  by  failure 
to  present,  etc.  (2)  The  drawer  of  a  bill,  and  any  indorser  of  a  bill  or 
negotiable  note,  is  entitled  to  notice  of  dishonor.  —  B.  (3)  Notice  to  the 
agent  of  the  drawer  or  indorser  authorized  to  receive  it  is  sufficient.  (4)  If 
the  party  to  be  notified  is  a  partnership,  notice  to  one  partner  is  sufficient. 
(5)  If  bankrupt,  notice  to  either  himself  or  his  assignee  would  probably 
be  good ;  but  it  is  safest  to  notify  both.  (6)  If  dead,  and  the  notifier 
knows  it,  notice  should  be  sent  to  his  "  legal  representative,"  and  notice 
to  one  of  several  executors  or  administrators  is  sufficient;  if  he  has  no 
legal  representative,  notice  sent  to  the  residence  of  the  deceased  is  suffi- 
cient. (7)  If  dead,  and  the  notifier  does  not  know  it,  and  his  igno- 
rance is  not  the  result  of  negligence,  a  notice  addressed  to  the  deceased 
is  good. 

((/)  What  and  How.  —  (1)  The  notice  must  carry  information  that  cer- 
tain specified  paper  is  dishonored,  and  that  the  person  notified  is  looked  to 
for  payment.  The  latter  clause  explains  why  it  is  that  mere  knowledge 
of  dishonor  not  communicated  by  one  entitled  to  call  for  payment  is  not 
notice.  Of  the  two  elements  of  notice  such  a  communication  only  con- 
tains one.  (2)  Notice  may  be  verbal  or  written;  and  although  the  single 
statement  that  a  bill  is  dishonored  coming  from  the  j)roper  source  is  suffi- 
cient, as  the  iutent  to  hold  the  person  notified  is  inferred,  or  the  state- 
ment that  the  person  is  looked  to  to  pay  a  bill  is  sufficient,  as  carrying  the 
inference  that  it  is  dishonored,  yet  it  is  better  that  the  notice  should  be 
in  writing,  and  contain  a  clear  statement  identifying  the  paper,  and  an- 
nouncing that  it  has  been  presented  and  dishonored,  and  that  the  holder 
or  notifier  looks  to  the  person  notified  to  pay  said  paper.  (.3)  It  makes 
no  difference  how  notice  be  sent,  whether  by  messenger  or  mail,  if  it 
actually  reaches  the  party  in  time.  (4)  A  special  messenger  is  always  a 
proper  method  of  sending  notice.  (5)  The  mail  may  be  used  whenever  the 
party  to  be  notified  resides  or  does  business  in  a  different  place  from  that 
where  the  notifier  resides  (but  see  6  y,  below),  or  where  the  bill  or  note  is 
payable;  also  where  the  said  places  are  not  different,  if  there  is  a  postal 
delivery,  and  the  letter  is  put  in  the  office  early  enough  to  go  to  its  destina- 
tion the  same  day  by  the  regular  carriers.  What  is  the  test  as  to  differ- 
ence of  place  is  a  question  on  which  authorities  differ,  some  holding  that 
the  post-office  is  to  be  used  only  for  transportation,  not  for  deposit,  and 
therefore  all  who  get  their  mail  at  the  same  post-office  are  deemed  to 
live  in  the  same  place ;  others,  among  them  the  United  States  Supreme 
Court,  say  that  where  the  person  to  be  notified  has  no  place  of  business 
or  residence  in  town,  but  lives  three  or  four  miles  out,  the  post-office 
may  be  used,  though  the  notifier  gets  his  mail  at  the  same  office.  The 
letter  should  be  addressed  to  the  proper  party  at  the  post-office  at  or 
nearest  to  his  place  of  business  or  his  residence,  as  the  notifier  elects,  unless 
the  party  gets  his  mail  at  some  other  office,  and  then  the  address  should  be 

463 


§  2G2  COLLECTION    IN    GENERAL. 

to  it.  Whenever  it  is  proper  to  use  the  mail,  a  notice  properly  addressed 
and  mailed  in  proper  time  fixes  the  liability,  whether  it  is  ever  received 
or  not,  for  the  post-office  is  agent  of  the  addressee.  (6)  (x)  When  the 
parties  live  in  the  same  place,  which  is  also  tlie  place  of  payment  or  ac- 
ceptance as  the  case  may  be,  the  notice  must  be  personal,  verbal  or  writ- 
ten ;  or  a  written  notice  umst  be  left  at  the  dwelling  (or  boarding-house) 
or  place  of  business  of  the  one  to  be  notified;  and  if  the  party  is  not  found 
at  such  place,  it  is  sufficient  to  leave  the  notice  with  any  one  on  the  prem- 
ises; if  such  place  is  closed,  notice  is  excused,  (y)  It  is  held  by  good 
authority,  that,  in  case  the  party  to  be  notified  resides  at  the  place  of 
payment,  personal  service  must  be  made,  although  the  notifier  resides 
elsewhere.  (See  Bowling  v.  Harrison,  6  How.  248;  contra,  Philipee  v. 
Harberlee,  4o  Ala.  60S.)  (2)  If  the  parties  reside  in  the  same  place,  but 
the  place  of  acceptance  or  payment,  and  therefore  of  protest,  is  elsewhere, 
the  mail  may  be  used.  These  rules  make  the  matter  of  personal  service 
depend  on  the  identity  of  the  domicil  of  the  jiarty  to  be  notified  with  the 
place  of  acceptance,  or  2^a,yment,  as  the  case  may  be;  and  this  identity  is 
determined  as  in  (5). 

§  262.    What  excuses   Non-Presentment  or  Want  of  Notice.  — 

(1)  Anything  which  obstructs  or  su.spnnds  commercial  communication  be- 
tween the  parties,  as  var  between  the  notion  of  the  holder  and  that  of  tlie 
acceptor,  or  between  the  nation  of  the  holder  and  that  of  tlie  drawer,  will 
interfere  with  and  excuse  notice,  or  any  accident,  or  epidemic,  or  revolu- 
tion, or  positive  prohibition  of  intercourse,  or  great  fire,  or  other  obstruction 
of  commerce.  Necessity  excuses  all  things ;  and  the  holder  is  only  required 
to  use  reasonable  and  ordinary  care  and  diligence,  and  if  it  appears  that  any 
calamity,  as  a  storm,  .ictaally  prevented  due  diligence  from  making  the 
presentment  or  giving  due  notice,  the  failure  is  excused  until  the  ob.-^truc- 
tion  ceases.  So  in  case  of  a  check,  if  the  drawee  bank  is  restrained  from 
paying  out  money  by  order  of  court,  presentment  and  notice  are  excused. 

(2)  When  there  is  no  person  legally  liable  primarily,  as  when  the  acceptor 
or  maker  is  dead,  and  no  representative  aiipointed,  presentment  is  ex- 
cused, though  some  cases  say  it  must  even  then  be  made  at  the  residence 
of  the  deceased,  and  notice  must  be  given  as  if  dishonored  in  all  such 
cases.  (3)  AVhen  due  diligence  cannot  find  out  the  residence  or  place  of 
busine.ss  of  the  party  to  whom  presentment  should  be  made  or  notice 
given,  the  duty  is  suspended  until  such  time  as  the  necessary  facts  can  be 
discovered.  But  when  the  maker  or  acceptor  cannot  be  found,  the  bill  is 
to  be  treated  as  dishonored,  and  notice  given  to  the  drawer  and  indorsers. 
Notice  is  excused  by  innocent  ignorance  of  the  address  of  the  one  to  be 
notified,  not  by  failure  to  find  the  one  to  whom  presentment  should  be 
made.  (4)  When  the  holder  or  his  agent  is  prevented  by  sickness,  or 
by  the  shortness  of  time  between  the  transfer  of  the  paper  to  him  and  its 
maturity,  presentment  and  notice  are  excused,  in  the  former  case  as  to 
all  parties,  in  the  latter  as  to  the  immediate  transferrer,  until  such  time 

464 


WAIVER   OF    DEMAND    AND   NOTICE,  §  263 

as  reasonable  diligence  can  overcome  the  difBculty.  (5)  Wiien  the  maker 
or  acceptor  has  absconded,  no  demand  is  necessary;  but  notice  must  be 
given.  (Massachusetts  co7ilru,  as  to  demand.)  (G)  Any  express  or  im- 
plied waiver  of  demand  or  notice  is  an  excuse,  as  if  the  drawer  or  au 
indorser  agrees  to  waive  notice,  or  so  acts  as  to  induce  the  holder  to  believe 
that  he  waives  it,  and  so  estops  himself,  it  is  an  excuse  as  to  such  drawer 
or  indorser.  (7)  A  promise  to  pay  or  acknowledgment  of  liability  by 
drawer  or  indorser  after  maturity,  and  with  knowledge  that  proper  de- 
mand and  notice  have  not  been  given,  is  a  waiver.  And  a  part  payment 
after  maturity  is  such  an  acknowledgment.  Part  payment  of  a  check  be- 
fore maturity  is  a  waiver  of  demand  and  notice.  (8)  If  the  drawer  have 
no  reasonable  expectation  that  the  bill  will  be  honored,  or  that  he  will  be 
able  to  secure  funds  to  meet  it,  it  is  not  necessary,  as  against  him,  to  pre- 
sent or  notify  ;  but  as  against  innocent  indorsers  the  usual  formalities 
are  necessary.  A  declaration  by  the  drawer  that  the  paper  will  not  be 
honored  excuses  presentment  and  notice.  So,  if  the  drawer  of  a  check 
have  no  funds  or  insufficient  funds,  or  withdraws  his  deposit,  or  orders 
the  bank  not  to  pay  the  check,  no  presentment  and  notice  is  necessary  as 
to  him,  — he  can  suffer  no  loss  by  its  absence;  but  as  to  an  indorser  such 
facts  are  no  excuse,  unless  he  knew  of  the  drawer's  fraud,  and  so  partici- 
pated in  it.  (9)  If  any  party  has  received  money  (or  perhaps  security, 
though  this  is  the  subject  of  conflict)  to  pay  the  paper  from  the  party  who 
is  ordinarily  primarily  liable,  as  against  him  demand  and  notice  are  ex- 
cused altogether;  for  he  is  now  the  one  who  should  pay  the  bill  in  the 
first  place. 

§  263.  No  Excuse.  —  The  loss  of  the  paper,  or  the  fact  that  the  drawee 
or  maker  is  dead  or  has  removed,  or  that  he  is  insolvent,  or  that  the 
drawer  or  indorser  has  been  appointed  executor  or  administrator  to  the 
maker  or  acceptor,  or  that  no  damage  has  actually  resulted  to  the  drawer 
or  indorser,  will  not  excuse  failure  to  present  and  give  notice.  But 
in  case  of  a  check,  the  drawer  is  discharged  only  so  far  as  actually 
damaged. 

VOL.  I.  30  465 


CHAPTER  XYII. 

THE  LIABILITY  OF  A  BANK  FOR  THE  NEGLIGENCE  OF  ITS  CORRE- 
SPONDENT, OR  OF  A  NOTARY,  OR  OTHER  AGENT  IN  COLLECTIONS. 
ALSO   OF  "  COLLECTION   AGENCIES." 

§  264.  Analysis. 

§§2G5,  2GG.  Notary. 

Bank  not  liable  for,  generally,  if  it  uses  due  care  in  selection. 

In  some  States  it  is  liable,  if  it  permanently  employs  him. 

In  some  States  bank  is  not  liable  for  his  default  in  official  duty. 

In  others,  bank  is  liable  for  official  default  of  notary,  as  well 
as  for  negligence  in  a  matter  which  might  have  been  done 
by  any  ordinary  agent. 
§  266.  Care  in  selecting  notary. 

§  267.  Collection  Agkncies. 

Hoover  v.  Wise,  and  otlier  cases. 

CORUESFONDENT. 

Liability  for. 

§  268.  Great  conflict  of  opinion.     Question  stated. 

§  269.  Special  agreement  governs. 

§  270.  Usage  may  decide. 

§  271.  Bank  is  everywhere  liable  if  it  docs  not  select  its  agents  with 

due  care. 
It  is  not  due  care  to  send  paper  to  the  drawee  for  collection. 

§  272.  New  York  holds  the  first  bank  responsible, 

§  273.  On  the  ground  that  the  contract  covers  all  the  means  em- 

ployed. 

§  274.  Massachusetts  liolds  the  bank  not  responsible, 

§  275.  On  the  grounds  that  usage  gives  authority  to  employ  sub- 

agents,  which  are  therefore  the  agents  of  the  holder,  and 
not  of  the  first  bank,  and  that  there  is  no  sufficient  consid- 
eration for  tlie  bank  to  undertake  the  risk  of  its  correspond- 
ent's negligence. 

§  276.  Discussion  of  the  question  from  the  ground  up  tends  to  support 

the  New  York  rule. 

§§  272, 277-280.  Cases  affirming  the  liability :  England,  New  York,  United 
States,  Ohio,  Indiana,  Michigan. 

§§  274,  281-287.  Authorities  denying  the  liability  :  Massachusetts,  Connecticut, 
Kansas,  Illinois,  Iowa,  Maryland,  Wisconsin,  Missouri,  Ten- 
nessee, Louisiana,  Pennsylvania;  C.  J.  Marshall  and  Chan- 
cellor Walworth. 

466 


LIABILITY    FOR   NOTARY.  §  265 

§  265.  Liability  for  Negligence  of  Notary.  —  In  Mississippi, 
the  bank  is  not  liable  if  the  paper  is  given  to  a  notary  in  time 
for  him  to  discharge  his  duties.^  In  those  States  which  do 
not  hold  a  bank  for  the  negligence  of  its  correspondent,  the 
same  reasons  would  prevail  against  its  liability  for  a  notary's 
default ;  ^  unless  the  bank  makes  a  particular  notary  its  per- 
manent employee,  as  in  a  Missouri  case,  where  the  bank  ap- 
pointed him  to  act  for  it  for  a  year,  and  took  a  bond,  as 
from  one  of  its  own  officers.^  This  is  the  doctrine  also  in 
England,  New  York,  Ohio,  Alabama,  Indiana,  and  one  United 
States  decision. 

Louisiana  on  the  same  facts  holds  the  bank  not  responsible. 
So  Massachusetts,  Maryland,  Mississippi,  Connecticut,  and 
Pennsylvania  hold.* 

In  Xew  York,  the  bank  is  liable  for  the  negligence  of  its 
notary  in  giving  notice  of  dishonor,  for  that  is  not  a  duty 
peculiarly  belonging  to  a  notary,  but  may  be  performed  by 
any  agent  of  the  bank  ;  but  for  default  in  anything  pertaining 
to  his  official  duty,  as  protest,  the  bank  is  not  liable.^  This 
distinction  is  not  recognized  in  the  cases  cited  above  from 
Maryland  and  Louisiana,  and  probably  not  in  Massachusetts.^ 

1  §265.  Tiernau  v.  Commercial  Bank,  7  How.  (Miss.)  648;  Agricul- 
tural Bank  v.  Commercial  Bank,  7  Sm.  &  M.  592;  Bowling  v.  Arthur,  oi 
Miss.  41. 

2  Warren  Bank  v.  Suffolk  Bank,  10  Gush.  582;  Citizens'  Bank  v. 
Howell,  8  Md.  530.     This  view  was  taken  in  Smedes  v.  Bank  of  Utica, 

20  Johns.  372. 

3  Gerhardt  v.  Boatman's  Savings  Inst.,  38  Mo.  60;  Van  Wart  v. 
Woolley,  3  Barn.  &  C.  439;  Allen  v.  Merchants'  Bank,  22  Wend.  215; 
Reeves  v.  State  Bank,  8  Ohio  St.  465;  Branch  Bank  v.  Knox,  1  Ala.  148; 
Bank  of  Mobile  v.  Iluggins,  3  Ala.  206;  American  Express  Co.  v.  Haire, 

21  Ind.  4;  Taber  v.  Perrot,  2  Gall.  565. 

*  Baldwin  v.  Bank  of  Louisiana,  1  La.  An.  13;  Hyde  v.  Planters' 
Bank,  71  La.  560.  See  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  582 
(Mass.);  Citizens'  Bank  v.  Howell,  8  Md.  530;  Bowling  v.  Arthur,  34 
Miss.  41;  East  Haddam  Bank  v,  Scovil,  12  Conn.  303;  Bellemire  v.  Bank 
of  United  States,  4  Whart.  105  (Pa.). 

5  Allen  V.  Merchants'  Bank,  22  Wend.  215;  Dormer  v.  Madison  Co. 
Bank,  6  Hill,  648 ;  Ayrault  v.  Pacific  Bank,  47  N.  Y.  574. 

6  See  Warren  Bank  v.  Suffolk  Bank,  10  Cush.  582,  and  Mass.  Pub. 
Stat.  §  22,  c.  77. 

467 


§  265  THE   LIABILITY   OF   A   BANK. 

In  South  Carolina'  and  in  New  Jersey  a  bank  is  lield  re- 
sponsible for  its  notary,^  and  in  Kansas  '-^  a  sub-agent  was  held 
liable  for  its  notary's  default,  though  in  that  State  there  is  no 
lial)ility  for  a  correspondent. 

In  the  United  States  ^*^  courts  and  in  Oliio,^^  a  bank  is  liable 
for  the  negligence  of  its  correspondent,  but  not  for  the  default 
of  a  notary,  for  he  is  an  independent  officer  whose  duties  are 
prescribed  by  law,  and  whom  the  bank  must  employ.  The 
bank  agrees  to  collect  if  possible  ;  and  if  not,  "  to  hand  it  to  a 
reputable  notary  in  season.  We  think  this  may  be  said  to  be 
the  natural  import  of  the  act  of  delivery  by  the  one  and  tak- 
ing by  the  other,  especially  in  a  jurisdiction  where  the  notary 
can  only  act  as  an  independent  officer."  "  The  bankers  were 
no  more  liable  than  they  would  have  been  for  the  unskilful- 
ness  of  a  lawyer  of  reputed  ability  and  learning,  to  whom  they 
might  have  handed  the  notes  for  collection  in  the  conduct  of 
a  suit  brought  upon  them." 

In  Tennessee,  a  bank  is  not  responsible  for  the  neglect  of 
its  correspondent's  notary.^^ 

Niccolls,  in  Illinois,  sent  to  Britten's  banking  firm  at  Natchez, 
Mississippi,  for  collection,  a  note  dated  at  Natchez,  inform- 
U  s^  ing  the  firm  of  the  maker's  residence,  but  only  in- 

Biitton  V.  structing  the  firm  to  cause  the  note,  if  not  paid  on 
Bank  not  lia-  presentment,  to  be  protested,  and  notice  to  be  sent 
bieforno-      ^q  ^|jq  indorscr.     The  firm  duly  put  the  note  in  the 

tary  s  default.  ^ 

Following  the  hauds  of  a  reputable  notary  at  Natchez,  who,  al- 
p^a^ceof'the  though  knowing  that  tlie  maker  resided  on  his 
collection.  plantation  fifteen  miles  distant  and  had  no  place 
of  business  in  Natchez,  merely  inquired  for  him  at  the  post- 

■^  Thompson  v.  Bank,  3  Hill,  77. 

*  So  held  where  notices  of  protest  had  an  indorsee's  name  "  Darcey," 
instead  of  "  Davey."  Davey  v.  Jones,  42  N.  J.  Law,  28  (1880)  ;  Titus 
V.  Mechanics'  National  Bank,  35  N.  J.  Law,  588  (1871) ;  Patterson  Bank 
V.  Butler,  7  N.  J.  Eq.  208. 

9  Bank  v.  Ober,  31  Kans  599. 

10  Britton  v.  Niccolls,  104  IL  S.  757. 
"  Bank  v.  Butler,  41  Ohio  St.  519. 

12  Bank  of  Louisville  v.  First  National  Bank  of  Knoxville,  8  Baxter, 
101  (1874). 
4G8 


LIABILITY   FOR   NOTARY.  §  267 

office,  city  hall,  and  court-house,  and,  not  fmdhig  him,  protested 
the  notes  for  nonpayment.  Held,  that  the  banking  firm  was 
not  liable  for  the  notary's  neglect  of  duty, —  the  Supreme 
Court  of  Mississippi,  in  Bowling  v.  Arthur,  34  Miss.  41,  hold- 
ing that  the  notary  is  the  agent  of  the  hulder.^^ 

§  2.Q)Q.  A  Bank  must  use  Due  Care  in  selecting  the  Notary.  — 
Ordinarily,  a  bank  which  has  to  employ  a  notary  public  would 
be  authorized  to  assume  that  any  person  bearing  the  govern- 
mental commission  of  office  was  a  proper  person  to  employ. 
It  has  been  held  that  this  official  character  is  prima  facie  evi- 
dence of  satisfactory  care  in  selection.^  In  fact,  it  probably 
amounts  simply  to  this,  that  the  bank  is  warranted  in  putting 
confidence  in  a  public  officer  of  whom  it  has  no  actual  knowl- 
edge, without  making  that  especial  inquiry  about  him  which 
it  would  be  bound  to  make  if  he  was  simply  a  private  individ- 
ual bearing  no  credentials,  and  unknown  to  the  bank  officers. 
But  if  a  bank  knows  as  matter  of  fact,  or  ought  to  know,  that 
a  particular  notary  is  for  any  reason  a  man  unfit  for  the  busi- 
ness and  trust  reposed  in  him,  the  committal  of  paper  to  his 
hands  would  be  an  act  of  carelessness  and  negligence  in  the 
performance  of  its  duty,  for  the  results  of  which  it  could  be 
held  to  answer.  The  standard  of  fitness  is  not  of  course  uni- 
form and  absolute ;  we  cannot  pretend  to  say  what  it  may  be 
in  all  the  various  States  of  the  Union,  but  we  have  some 
knowledge  of  what  it  is  in  Mississippi.  The  court  there  de- 
clared that  it  was  not  sufficient  proof  of  a  notary's  unfitness 
to  show  that  he  was  a  man  of  habitually  dissipated  character ; 
but  that  it  must  be  shown  "  that  he  ivas  drunk  at  the  time  he 
took  the  note."^ 

§  267.  Collection  Agency  Cases.  —  Before  considering  the 
question  of  a  bank's  liability  for  its  correspondent,  we  must 
distinguish  that  class  of  cases  in  which  an  agency  undertakes 
to  collect  in  distant  places,  through  its  own  permanent  em- 
ployees located  in  such  places,  and  who  are  as  truly  its  ser- 
vants under  its  control  and  in  its  pay  as  the  officers  or  regular 

13  Britton  v.  Niccolls,  104  U.  S.  757  (1881). 

1  §  266.    Stacy  v.  Dane  County  Bank,  12  Wis.  629. 

2  Bowling  V.  Arthur,  34  Miss.  41. 

469 


§  268  THE   LIABILITY    OP   A    BANK. 

employees  in  the  principal  location.  These  agencies  advertise 
in  this  style,  "  Collections  made  in  all  parts  of  the  United 
States  and  Canada,"  and  do  the  business  for  a  compensation 
whose  proportion  to  the  sum  collected  and  woi'k  done  will 
base  a  reasonable  inference  that  the  company  undertakes  the 
risk  as  a  matter  of  contract.  In  such  cases  the  company  has 
been  held  for  the  negligence  of  its  employees  or  agents  in 
other  places,  by  the  courts  ^  of  Pennsylvania,  Alabama,  Indiana, 
and  by  the  United  States  Supreme  Court. 

In  Hoover  v.  Wise,  C.  gave  certain  notes  to  such  an  agency 
(W.)  in  New  York.  W.  sent  them  to  lawyers  in  Nebraska, 
and  it  was  held  that  the  latter  were  agents  of  "W.,  not  of  C. 
The  decision  rested  mainly  on  the  ground  of  the  Pennsylvania 
cases  quoted  in  the  last  note ;  but  although  distinguishable 
easily  from  the  cases  on  the  general  question  of  resjjonsibility 
for  a  correspondent,  the  court  referred  to  some  of  the  cases 
affirming  this  liability  in  New  York  and  Ohio,  and  then  dis- 
played its  research  by  remarking,  "  There  are  doubtless  cases 
to  be  found  holding  the  contrary  of  these  views,  but  the  prin- 
ciple they  decide  is  nevertheless  well  established,"  while  at 
that  time  the  fact  was  that  the  overwhelming  authority  of  the 
States,  backed  by  a  clear  opinion  of  C.  J.  Marshall,  denied 
that  principle. 

The  dissent  by  Justices  Miller,  Clifford,  and  Bradley  was 
very  strong,  showing  that,  even  if  the  principle  of  the  bank 
cases  cited  by  the  court  were  admitted,  it  did  not  api)ly  to  the 
case  at  bar ;  for  when  a  note  is  given  to  a  bank  to  collect  it  is 
indorsed  to  the  bank,  and  made  payable  to  it,  so  that  it  can 
sue  in  its  own  name ;  but  here  the  note  was  not  indorsed  to 
W.,  who  therefore  had  no  control  of  the  suit,  while  C.  could 
exercise  full  control  in  regard  to  the  proceedings. 

§  268.  Liability  for  a  Correspondent.  —  We  must  now  ap- 
proach a  topic  wherein  will  be  encountered  a  diversity  of  opin- 
ion which  is  utterly  irreconcilable.     Positions  directly  adverse 

1  §  267.  Bradstreet  v.  Everson,  72  Pa.  St.  124;  Morgan  v.  Tener,  83 
Pa.  St.  305;  Lewis  ;-'.  Peck  &  Clark,  10  Ala.  142;  Pollard  v.  Rowland,  2 
Blackf.  22  (Ind.,  1820);  Hoover  v.  Wise,  91  U.  S.  308.    See  WUkinson  v. 
Griswold,  12  S.  &  M.  669;  Cummins  v.  Heald,  24  Kans.  600. 
470 


LIABILITY   FOR   CORRESPONDENT.  §  269 

to  each  other  have  been  assumed  with  much  oljstinacy.  Be- 
yond this  honest  discrepancy,  a  further  vexatious  complication 
is  introduced  by  the  use  in  some  decisions,  delivered  by  high 
tribunals,  of  such  dubious  lang-uagc  that  it  is  positively  im- 
possible to  know  precisely  upon  which  side  to  rank  them,  or 
even  whether  they  really  ought  to  be  ranked  upon  either  side, 
and  should  not  rather  be  formed  into  a  group  and  class  by 
themselves.  This  confusion  grows  out  of  the  process  of  trans- 
mission through  banks,  situated  in  various  different  places,  of 
paper  which  is  payable  in  a  town  other  than  that  in  which 
the  holder  resides,  and  in  which  the  bank  of  deposit  transacts 
business.-  The  question  concerns  the  duty  and  liability  of  the 
several  banks  preceding  in  the  chain  of  transmission  the  last 
one  which  has  to  effect  the  actual  collection.  Thus,  if  A. 
living  in  Portland  holds  a  note  payable  in  New  York  and 
deposits  it  in  his  bank  in  Portland  for  collection,  the  bank 
in  Portland  may  be  supposed  to  forward  it  to  its  correspond- 
ent bank  in  Boston,  which  in  turn  will  forward  it  to  its  cor- 
respondent bank  in  New  York  City,  where  finally  the  collection 
is  to  be  made.  The  question  then  is,  whether  or  not  the  Port- 
land bank  has  so  far  fulfilled  and  discharged  its  duty  to  A.  by 
the  due  and  sufficient  transmission  of  the  paper  on  its  course 
for  collection  that  it  is  thereby  freed  and  absolutely  relieved 
from  all  liability  for  defaults  subsequently  occurring  in  Boston 
or  in  Isew  York ;  or  whether,  on  the  other  hand,  the  Boston 
and  New  York  banks,  and  any  agent  employed  by  the  last 
bank  in  the  business  of  collection,  are  all  sub-agents  of  the 
Portland  bank,  in  such  a  sense  that  the  law  of  agency  ren- 
dering it,  as  principal,  lialdc  to  answer  for  any  and  all  their 
defaults,  will  govern  in  the  case. 

§  269.  Special  Agreement.  —  If  there  is  an  express  contract 
upon  the  matter  of  the  first  bank's  responsibility,  of  course 
the  question  will  be  governed  by  it,  and  if  the  character  of 
the  contract  and  the  consideration  is  such  as  to  indicate  such 
an  intent,  the  first  bank  will  be  held  liable,  even  in  those  States 
where  upon  the  ordinary  contract  it  is  not  held.  For  exam- 
ple, in  Pennsylvania,  if  a  bank  receives  a  reward  for  collecting 
beyond  the  expense,  and  mere  nominal  charge  for  service  in 

471 


§  272  THE   LIABILITY   OP   A    BANK. 

forwarding,  and  employs  a  Virginia  bank  to  collect  the  note, 
the  Pennsylvania  bank  will  be  responsible  for  any  negligence 
of  the  Virginia  bank.^ 

§  270.  Usage  may  determine  the  qnestion.  If  the  law  has 
not  been  already  settled  by  judicial  determination,  so  as  to 
exclude  any  subsequent  evidence  of  usage  to  subvert  it,  the 
bank  may  absolve  itself  from  liability  for  the  acts  of  agents 
other  than  itself,  or  the  customer  may  fix  such  liability  upon 
the  bank,  by  showing,  respectively,  that  such  is  the  established 
usage  and  understood  custom  in  the  place  where  the  bank, 
the  extent  of  whose  duty  and  liability  is  in  question,  is  situ- 
ated. But  the  evidence  must  show  a  usage  having  the  strictly 
legal  traits;  it  must  be  a  real  bona  fide  usage,  an  actual  prac- 
tice, a  general  understanding,  not  the  mere  opinion  of  either 
merchants  or  bankers,^ 

§  271.  A  Bank  is  everywhere  held  liable  if  it  is  itself  negligent 
in  the  Selection  of  its  Correspondent. — See  chapter  preceding. 

When    the    Bank   has    used    Due    Care,  and    the    Matter    is    not 
Determined  by  Usage   or   Special  Agreement. 

§  272,  The  New  York  Rule  is  that  the  first  bank  is  respon- 
sible for  the  negligence  of  its  correspondent  and  its  agents ;  ^ 

they  are  agents  of  the  first  bank  (B.).  There  is 
of  New  York  no  privitv  between  them  and  the  liolder  (C),  and 

the  latter  cannot  hold  them  directly  except  he  may 
sue  the  correspondent  (M.)  for  money  had  and  received,  in 
case  M.  had  notice  of  B.'s  insolvency  before  he  (M.)  received 
payment  on  the  note,  and  that  no  dealings  occurred  between 
M.  and  B.  that  could  constitute  M.'s  possession  of  the  note  a 
bona  fide  holding  for  value  without  notice,  and  that  C.  was  the 
owner  of  the  note.^ 

1  §  269,  Mechanics'  Bank  v.  Earp,  4  Rawle,  384. 

1  §270.  Allen  v.  Merchants'  Bank,  22  Wend.  215;  Warren  Bank  v. 
Suffolk  Bank,  10  Cush.  58-3;  Jackson  v.  Union  Bank,  (>  Har.  &  J.  146. 

1  §272.  Allen  v.  Merchants'  Bank,  22  Wend.  215;  Ayrault  (;.  Pacific 
Bank,  47  N,  Y.  570;  Indig  v.  Brooklyn  City  Bank,  16  llun,  203.  See 
Montgomery  Co.  Bank  v.  The  Albany  City  Bank,  7  N.  Y.  459, 

2  Wicks  V.  Hatch,  62  N.  Y.  535;  Wilson  v.  Smith,  3  How.  763;  Strong 
V.  Stewart,  9  Heisk.  137;  Reeves  v.  State  Bank,  8  Ohio  St.  465. 

472 


LIABILITY   FOR   CORRESPONDENT.  §  273 

The  New  York  rule  is  helcP  in  England,  Ohio,  Indiana, 
Michigan,  New  Jersey,  and  in  a  recent  decision  of  the  United 
States  Supreme  Court. 

§  273.  Those  authorities  which  hokl  that  the  l)ank  first 
receiving  the  paper  is  answerable  for  the  conduct  of  any  and 
all  the  subsequent  agents,  be  they  banks  or  notaries,  Grounds  of 
base  their  decision  upon  the  old  and  strict  principle  bUkHnirst" 
in  the  law  of  agency,  that  the  first  agent  is  liable  for  ^''''^■ 
the  acts  of  all  the  sub-agents  employed  by  him.  They  urge 
that  the  bank  is  employed  to  perform  the  task  of  collection  in 
any  manner  that  it  may  see  fit,  trammelled  by  no  restrictions 
or  directions  whatsoever  as  to  the  persons  or  corporations 
whose  services  it  shall  employ,  if  it  does  not  itself  wish  to 
attend  to  the  whole  transaction.  This  task  is  declared  to  be 
that  which  the  bank  undertakes  to  do.  If  it  chooses  to  use 
the  medium  of  sub-agencies,  it  selects  those  which  it  prefers, 
and  is  free  to  trust  them  more  or  less,  and  to  instruct  them  as 
it  chooses.  They  are  directly  its  own  agents  and  employees, 
and  both  law  and  justice  demand  that  it  should  answer  for 
their  conduct  to  its  own  principal.  New  York  (and  the 
other  decisions  affirming  the  liability  are  only  reflections  of 
New  York  light)  bases  its  ruling  upon  the  ground  that  a  co7i- 
tract  to  do  the  business  covers  all  the  means  employed,  and 
upon  the  assumption  that,  when  a  note  is  given  to  a  bank  to 
collect,  it  is  a  contract  to  do  the  whole  business  and  not 
merely  to  forward,  which  is  assuming  the  very  thing  to  be 
proved,  and  upon  no  argument  except  the  oft  exposed  fallacy 
of  "  sufficient  reason,"  which  runs  thus  :  "  There  is  no  reason 
(known  to  me)  why  this  should  not  be  so,  therefore  it  is 
so," — which  simply  applies  to  the  universe  the  limitations  of 
the  mind  of  the  speaker.     (See  Mill's  System  of  Logic,  p.  464, 

8  Van  Wart  v.  AVoolley,  3  Bam.  &  C.  439;  IVIackersy  v.  Ramsays,  9  C.  & 
F.  818;  Reeves  v.  State  Bank  of  Ohio,  8  Ohio  St.  465;  American  Express 
Co.  V.  Haire,  21  Tnd.  4;  Tyson  v.  State  Bank,  6  Blackf.  225;  Simpson  v. 
Waldby,  30  N.  W.  Rep.  199;  Titus  v.  Mechanics'  National  Bank,  35 
N.  J.  Law,  588;  Exchange  National  Bank  v.  Third  National  Bank,  112 
U.  S.  270;  Taber  v.  Perrot,  2  Gall.  565;  Hyde  v.  First  National  Bank,  7 
Biss.  156;  Kent  i'.  Dawsou  Bank,  13  Blatchf.  237. 

473 


§  275  THE   LIABILITY   OF   A    BANK. 

and  compare  Senator  Verplanck's  argument  in  the  leading 
New  York  case  below.) 

§  274.  The  Massachusetts  Rule  is/  that  when  the  first  bank 
transmits  the  note  with  proper  instructions  to  a  reputable  and 
proper  agent,  either  in  the  place  where  the  collection  is  to  be 
made,  or  in  the  place  nearest  thereto  where  it  has  a  corre- 
spondent or  agent  whom  it  deems  fit  to  employ  for  the  pur- 
])0sc  of  forwaiding,  it  has  done  its  duty,  and  is  not  responsible 
for  the  negligence  of  the  correspondent  or  its  agents. 

This  rule  is  adopted  in  Connecticut,^  Kansas,^  Illinois,* 
lowa,^  Maryland,^  Mississippi,"  Missouri,^  Tennessee,^  Wiscon- 
sin,^*^ Louisiana,^^  Pennsylvania,^^  and  in  the  decision  of  the 
United  States  Supreme  Court  in  the  case  of  the  Bank  of  Wash- 
ington V.  Triplett,i'5  C.  J.  Marshall  delivering  the  opinion,  and 
in  the  strong  dissent  of  Chancellor  Walworth  in  Allen  v.  Mer- 
chants' Bank  ^^  in  New  York. 

§  275.  First,  although  it  is  a  well  settled  rule  that  an  agent 
Grounds  of  is  in  general  liable  for  the  sub-agents  employed  by 
doctrine.  him,  it  is  also  well  settled  that  there  is  an  exception 
to  the  rule  whenever  there  is  authority,  expressly  given,  or 

1  §  274.  Fabens  v.  Mercantile  Bank,  23  Pick.  330;  Dorchester  &  M. 
Bank  v.  New  England  Bank,  1  Cush.  177;  see  Darling  v.  Stanwood, 
14  Allen,  504. 

2  Lawrence  i'.  Stonington  Bank,  6  Conn.  521 ;  East  Haddam  Bank  v. 
Scovil,  12  Conn.  303. 

3  Bank  V.  Ober,  31  Kans.  599. 

*  iEtna  Ins.  Co.  v.  Alton  City  Bank,  25  111.  243. 
^  Guelick  v.  National  Bank,  56  Iowa,  434. 

«  Citizens'  Bank  u.  Howell,  8  Md.  530;  Jackson  v.  Union  Bank,  6 
Harr.  &  J.  14G. 

^  Tiernan  v.  Commercial  Bank,  7  How.  648;  Agricultural  Bank  v. 
Commercial  Bank,  7  Sm.  &  M.  592;  Bowling  v.  Arthur,  34  Miss.  41. 

8  Daly  V.  Butchers  &  Drovers'  Bank,  56  Mo.  94. 

*  Bank  of  Louisville  v.  First  National  Bank,  8  Baxter,  101. 
I"  Stacy  V.  Dane  Co.  Bank,  12  Wis.  629. 

"  Hyde  v.  Planters'  Bank,  17  La.  560;  Baldwin  v.  Bank  of  Louisiana, 
1  La.  An.  13. 

12  Merchants' Bank  V.  Goodman,  109  Pa.  St.  422;  and  see  Mechanics' 
Bankt).  Earp,  4  Rawle,  384;  and  Bellemire  v.  U.  S.  Bank,  4  Whart.  105. 

"  1  Pet.  25, 

1*  22  Wend.  215;  and  see  Smedes  v.  Bauk  of  Utica,  20  Johns.  373. 
474 


LIABILITY    FOR    CORRESPONDENT.  §  275 

fairly  implied  from  the  usage  of  trade,  or  the  exigencies  of  the 
case,  to  employ  such  sub-agent.^ 

"  If  there  exists  in  relation  to  the  business  a  known  and 
established  usage  of  substitution,  the  principal  would  be  held 
to  have  expected  and  authorized  such  substitution,"  and  "  a 
substitute  appointed  by  an  agent,  who  has  this  power  of  sub- 
stitution, becomes  the  agent  of  the  original  principal,  and 
may  bind  him  by  his  acts,  and  is  responsible  to  him  as  his 
agent."  2 

Now  in  the  case  of  collection,  the  usage  to  forward  to  a 
sub-agent  is  well  established,  and  the  parties  must  be  pre- 
sumed to  contract  in  reference  to  it.  The  customer  expects, 
or  ought  to  expect,  that  the  bank  will  pursue  the  ordinary 
course  of  business  in  such  matters ;  this  usual  course  is  well 
known  to  be  simply  the  transmission  to  another  agent  in  good 
repute,  and  this  is  all  the  bank  or  the  customer  can  be  sup- 
posed to  contemplate  as  that  duty  of  which  the  accurate  per- 
formance is  guaranteed  by  the  corporation. 

Ordinarily,  when  there  is  any  commission  paid  for  collec- 
tion, it  is  a  very  small  one  ;  but  probably  in  the  great  majority 
of  cases  the  business  is  wholly  gratuitous,  and  the  The  consid- 

eration  taken 

consideration  is  only  that  slight  and  indirect  one  ^viii  not 
which  arises  from  the  anticipation  of  enjoying  for  ]]^lllnce  of 
a  few  days  the  use  of  the  money  collected,  or  from  ^"^^e\h/'' 
the  manifestation  of   a  willingness  to  oblige  cus-  risk. 
tomers.     Such  considerations  may  well  be  regarded  as  suffi- 
cient for  the  mere  task  of  transmission ;  but  it  is  impossible 
that  they  should  be  sufficient  to  sustain  an  agreement  to  be 
further  responsible  for  the  solvency  and  good  conduct  and 
thorough  performance  of  their  duties  on  behalf  of  all  sub- 
sequent banks  and  notaries,  or  other  agents  whom  it  may  be 
necessary  to  employ.     Such   an  insurance  would  call  for  a 
high  premium.     It  is  incredible  to  suppose  that  the  bank  for 
a  very  small  possible  remuneration,  much  more  for  a  wholly 
contingent  return  in  any  shape,  assumes  so  great  a  risk. 
In  cases  where  the  compensation  is  such  as  to  base  an  in- 

1  §  275.  Story  on  Agency,  §§  201-214. 
^  1  Parsons  on  Contracts,  72,  73. 

475 


§  276  THE   LIABILITY    OF   A    BANK. 

ference  that  it  was  intended  to  cover  something  more  than 
the  mere  service  rendered,  or  where  there  is  no  clear  authority 
for  substitution,  the  contract  to  assume  the  risk  may  be,  with 
more  show  of  reason,  imjihed  by  the  law.^ 

To  this  it  may  be  added,  that  the  reasoning  of  the  affirma- 
tive cases  applies  as  well  to  a  notary  as  to  a  correspondent 
bank.  If  the  contract  to  collect  is  an  agreement  "  to  do  the 
business^''  "to  employ  proper  means  by  whomsoever  used," 
then  a  bank  is  responsible  for  a  notary's  default ;  and  yet  this 
is  denied  even  in  New  York,  the  stronghold  of  the  affirmative, 
upon  the  plea  that  a  notary  is  a  pul)lic  officer  whose  duties 
are  prescribed  by  law.  Tliis,  however,  is  a  mere  surface  dis- 
tinction; a  bank  is  also  a  public  institution,  and  its  duties 
are  just  as  truly  fixed  by  the  law,  and  a  bank  is  no  more 
obliged  to  select  any  particular  notary  than  it  is  to  choose  a 
particular  bank  for  its  correspondent. 

§  276.  Discussion  of  the  Question  of  Liability  for  Corre- 
spondent. —  If  we  try  to  stand  oif  and  take  a  comprehensive 
view  of  this  much  trodden  ground,  and  endeavor  to  distinguish 
the  footsteps  of  justice  from  those  of  other  things  that  have 
the  power  of  leaving  their  impressions  on  the  sands  of  time, 
it  will  be  clear  at  once,  that,  so  far  «s  any  argument  can  he 
based  upon  the  prmeiples  of  contract,  the  negative  must 
receive  our  approbation. 

That  parties  contract  in  reference  to  established  usage  affect- 
ing the  subject  matter,  that  the  intent  of  those  who  make  the 
agreement  is  to  govern,  and  that  this  intent  is  to  be  collected 
from  their  words  and  acts  viewed  in  the  light  of  the  circum- 
stances, are  principles  too  nearly  and  plainly  related  to  justice 
herself  to  allow  us  to  doubt  their  lineage  for  a  moment. 

The  reasoning  of  §  275  seems  therefore  conclusive,  if  we 
confine  ourselves  to  an  a  posteriori  view  of  a  transaction  of 
the  class  avc  arc  considering  in  the  light  of  contract. 

(«)  Turning  to  the  general  principles  upon  which  one  may 
be  justly  held  for  the  defaults  of  others,  aside  from  any  con- 

3  See  the  agency  cases  above,  and  Bank  of  Kentucky?;.  Adams  Express 
Co.,  93  U.  S.  174;  Loomis  v.  Simpson,  13  Iowa,  532;  Abbott  v.  Smith, 
4Ind.  452;  Ellis  v.  Turner,  8  T.  R.  531. 
476 


LIABILITY   FOR   CORRESPONDENT.  §  276 

tract  to  be  so  responsible,  we  have  to  note  that  the  aim  of 
the  law  is  to  secure  the  public  good  by  encouraging  and  de- 
veloping such  conduct  and  qualities  as  experience  shows  to  be 
beneficial  to  the  community,  and  preventing  and  exterminating 
such  conduct  and  qualities  as  experience  and  the  nature  of 
things  show  to  be  detrimental  to  society.  Thus,  good  faith, 
prudence,  foresight,  increase  of  wealth,  are  invalualjlc,  and  the 
law  is  one  means  brought  to  bear  by  the  social  body  upon  each 
individual  to  secure  such  conduct  from  him  as  accords  with 
those  qualities  and  objects,  while  fraud,  imprudence,  lack  of 
foresight,  and  waste  of  wealth  in  any  individual  being  detri- 
mental to  others,  these  others  in  the  shape  of  the  State  seek 
through  law  to  repress  these  qualities  in  the  individual,  and  to 
prevent  conduct  of  which  they  are  the  sources.  The  law  is  only 
a  captain  in  the  great  army  of  forces  warring  upon  human 
savagery,  and  striving  to  elevate  the  race,  by  repression  and 
elimination  of  what  is  evil  in  it,  and  development  of  what  is 
good  in  it.  It  is  a  part  of  the  effort  put  forth  by  each  indi- 
vidual, and  by  each  combination  of  individuals,  to  control  all 
other  things  and  persons  to  the  fulfilment  of  his  or  their 
desires. 

In  the  case  of  class  legislation  good  and  evil  are  interpreted 
in  reference  to  the  benefit  or  disadvantage  of  the  ruling  class, 
but  in  the  common  law  the  question  is  between  an  individual 
and  the  whole  mass  of  the  community  beside.  Now  if  the 
evil  and  the  good  were  found  chemically  pure,  if  there  were 
no  gold  with  the  dirt,  if  a  man  of  imprudence  had  never  any 
beneficial  quality  mingled  with  his  evil  dispositions,  the  prob- 
lem would  be  simple,  the  blood  of  society  could  be  purified 
quickly  and  easily  by  exterminating  all  individuals  exhibiting 
detrimental  qualities ;  but  as  this  is  not  the  case,  as  good  and 
evil  are  mingled  in  each  person,  there  arises  a  necessity  for 
that  proportion  hetiveen  repression  and  evil,  or  encourafiement 
and  good,  which  men  call  justice  ;  for  if  care  is  not  taken  to 
repress  an  individual  only  in  proportion  to  the  evil  tendency 
manifested,  the  repression  acts  upon  his  good  qualities.  And 
if  A.,  having  certain  beneficial  qualities,  receives  more  en- 
couragement than  B.,  having  equally  beneficial  qualities,  the 

477 


§  276  THE    LIABILITY   OF   A    BANK. 

excess  really  amounts  to  so  much  scope  and  encouragement  to 
A.'s  detrimental  qualities  as  well  as  his  good  ones. 

One  method  adopted  in  the  common  law  to  secure  this 
equivalence  between  repression  and  evil  is  like  one  of  those 
chosen  by  nature  in  the  development  of  life  ;  viz.  to  throw 
the  loss  arising  in  any  transaction  upon  the  one  who  has  in 
the  course  of  the  actions  producing  the  loss  manifested  in 
greater  degree  such  qualities  as  it  is  desirable  to  eliminate. 

This  is  imperfect ;  for  in  case  both  A.  and  B.  have  been 
guilty  of  detrimental  contributory  conduct,  the  loss  should  be 
divided,  and  in  some  States  this  is  done  in  cases  of  negligence, 
but  usually  the  common  law  refuses  to  interfere  at  all  when 
both  parties  are  substantially  in  fault,  which  leaves  the  loss 
on  the  unlucky  one,  and  serves  in  many  cases  practically  to 
enable  a  rascal  to  profit  by  liis  badness,  and  although  it  is 
true  the  law  cannot  waste  time  and  money  to  henejit  another 
rascal,  still  it  might  very  well  refuse  to  allow  either  one  to 
retain  the  benefit,  i.  e.  confiscate  it  for  the  puljlic  good. 

Now  apply  this  test  of  equivalence  to  the  question  of  the 
degree  of  responsibility  to  which  any  individual  can  be  justly 
held. 

If  B.'s  conduct  is  in  itself  neither  detrimental  nor  beneficial, 
in  an  appreciable  degree,  to  the  community,  as,  for  example, 
the  keeping  of  dangerous  wild  animals,  he  may  very  properly 
be  held  absolutely  for  all  loss  that  may  ensue  to  C,  without 
C.'s  fault,  whether  B.  was  careless  or  not.  This  is  the  zero 
line. 

If  B.'s  conduct  is  in  its  very  nature  detrimental,  then  in 
proportion  to  its  tendency  to  produce  evil  consequences,  and 
in  the  proportion  that  a  tendency  to  subsequent  evil  action  is 
manifested  by  such  conduct,  society  should  take  measures  to 
prevent  B.  from  producing  further  evil  individually,  or  through 
the  laws  of  inheritance,  and  thus  results  the  criminal. 

If,  in  the  third  place,  B.'s  conduct  is  in  its  nature  beneficial, 
as  commercial  transactions  in  general  are,  but  in  the  course 
of  the  business  B.  makes  some  error  of  judgment,  or  loss 
occurs  through  the  neglect  or  fault  of  one  selected  by  B.  to 
aid  in  the  matter,  it  is  clear  that  the  law  of  equivalence  or 
478 


LIABILITY   FOR   CORRESPONDENT.  §  276 

justice  will  not  allow  B.  to  be  held  responsible  for  a  degree  of 
care  and  foresight  beyond  that  required  of  C.  in  other  matters 
of  business  alike  beneficial  in  their  nature.  It  is  clearly  un- 
just for  C.  and  his  class  to  say  to  B.  and  his  class,  "  If  you 
suffer  loss  from  my  lack  of  foresight  or  judgment,  in  any  case 
where  I  have  conducted  myself  as  a  man  of  ordinary  care  and 
prudence  would  in  the  management  of  his  own  affairs  under 
the  same  circumstances,  you  will  have  to  bear  the  loss  your- 
self, for  you  cannot  expect  me  to  be  superior  to  the  average 
in  my  business ;  but  if  we  suffer  loss  from  your  error,  or  that 
of  any  one  selected  by  you,  you  will  have  to  answer  to  us 
absolutely,  even  though  you  have  been  more  careful  than  the 
most  careful  of  men  usually  are  in  their  own  business  of  simi- 
lar nature  and  danger."  A  perfect  fulfilment  of  the  law  of 
equality  would  require  that,  if  one  is  to  be  held  absolutely 
responsible  for  the  result  of  their  actions,  all  should  be.  If 
one  is  to  be  held  only  to  such  care  as  a  man  of  ordinary 
prudence  and  foresight  exercises  in  his  own  affairs  of  similar 
moment  and  danger,  all  should  be  required  to  come  up  to  the 
same  standard,  and  no  one  punished  for  not  going  higher. 

(6)  But  perfect  justice  is  unattainable ;  we  have  to  choose 
between  injustices,  and  it  is  never  safe  to  conclude  that  a  cer- 
tain course  is  not  a  proper  one,  and  truly  the  most  just  course, 
because  we  are  convinced  it  does  not  perfectly  accord  with 
the  law  of  equality ;  we  must  further  inquire  whether  the 
alternate  course  does  not  involve  still  greater  injustice ;  and 
in  the  case  before  us,  the  law  may  very  properly  say  to  B., 
Your  business  is  of  such  an  intricate  nature,  and  extends  over 
so  wide  a  territory,  and  the  sources  of  our  information  are  so 
peculiarly  within  your  own  grasp,  that  it  is  very  difficult  in  any 
case  that  may  arise  to  determine  the  question  whether  you  have 
exercised  due  care  or  not,  while  in  C.'s  case  it  is  a  much  sim- 
pler question.  Practically,  therefore,  the  only  way  to  be  sure 
of  your  exercising  proper  care  is  to  make  you  responsible  any 
way,  and  so  give  you  the  strongest  motive  for  care,  which  rule, 
although  it  may  work  some  injustice  to  you,  is  like  to  work 
less  injustice  to  the  whole  community  than  an  arrangement 
by  which,  owing  to  the  difficulty  of  proving  your  negligence, 

479 


§  276  THE   LIABILITY   OP   A    BANK. 

you  would  often  escape  the  consequences  of  actual  fault ; 
while  in  C.'s  case  such  a  departure  from  the  exact  line  is  not 
necessary,  for  the  relative  simplicity  of  the  problem  in  his 
case  makes  it  easy  to  apply  the  standard. 

Moreover,  litigation  is  expensive,  and  it  must  be  one  object 
of  the  law  to  waste  as  little  as  possible  of  the  wealth  of  the 
community  in  judicial  inquiry.  Now  the  degree  of  care  which 
a  prudent  man  would  exercise  in  your  business  is  by  its 
nature  and  importance  very  high,  and  though  strict  justice  to 
you  would  not  warrant  imposing  an  absolute  responsibility  on 
you,  yet  as  we  have  to  choose  between  this  slight  injustice 
to  you  of  putting  the  line  of  your  liability  a  little  higher  than 
that  of  your  neighbors,  and  the  greater  injustice  to  the  com- 
munity of  exposing  them  to  tedious,  inconvenient,  and  expen- 
sive litigation,  first  here  to  determine  the  question  of  your 
care,  and  then  perhaps  in  some  distant  city  with  which  the 
plaintiff  has  no  connection,  we  are  compelled  to  select  the 
first  course,  which,  though  it  puts  a  pressure  upon  you  beyond 
the  equal  line,  has  the  merit  of  being  a  pressure  in  the  direc- 
tion of  progress  and  the  development  of  still  greater  prudence 
and  foresight,  (both  on  your  part  and  on  the  part  of  your 
correspondents,  for  they  can  much  more  surely  be  held  to 
account  by  you  than  by  C.,)  while  the  other  path  would  lead 
to  the  encouragement  of  fraud  and  the  waste  of  time  and 
money  in  intricate  inquiry. 

(c)  Or,  coming  again  upon  contract  ground,  although  look- 
ing haek  at  a  completed  transaction,  it  is  impossible  to 
conclude  that  the  parties  intended  that  the  bank  should 
assume  the  risk  of  losing  the  amount  of  the  note  or  bill, 
yet  if  we  turn  and  look  forward,  considering  the  effect  of 
the  decision  to  be  given  not  as  to  the  justice  between  the 
parties  in  the  case  giving  rise  to  the  litigation,  but  as  to 
the  future  of  the  business,  we  may  well  say  to  the  bank,  On 
the  whole  the  best  and  most  convenient  arrangement  in  such 
matters  would  be  that  you  should  take  the  responsibility,  and 
make  a  reasonable  charge  for  your  risk ;  you  have  intimate 
relations  with  these  persons  selected  by  you  in  distant  cities, 
you  can  much  more  easily  hold  them  to  account,  than  a  pri- 
480 


LIABILITY    FOR    CORRESPONDENT.  §  277 

vate  person  here ;  your  knowledge  of  your  correspondents  is 
an  intricate  matter,  and  the  question  of  your  care  a  difhcult 
one,  which  to  save  cost  it  is  well  to  exclude  from  the  law; 
therefore,  unless  you  make  an  express  agreement  to  the  con- 
trary, we  shall  in  future  consider  this  to  be  the  law,  and  you 
can  conduct  yourself  accordingly.  To  accomplish  our  pur- 
pose of  establishing  this  as  the  law,  we  must  decide  this 
case  against  you  for  a  precedent,  although,  if  we  had  not  the 
future  in  mind,  but  only  decided  upon  the  facts  of  this  case, 
the  judgment  would  be  the  other  way. 

This,  we  believe,  makes  pretty  clear  the  sources  of  the  con- 
flict on  this  question,  and,  while  it  furnishes  a  solid  basis  for 
the  New  York  rule  in  reference  to  the  future  good  of  society 
upon  considerations  probably  felt  by  the  judges  in  New  York 
and  in  the  United  States  Supreme  Court,  (though  the  actual 
grounds  of  their  decision  as  expressed  by  them  are  not  put 
in  any  such  light  as  to  justify  it,)  the  discussion  discloses  the 
invincible  reasoning  of  the  negative  if  the  eye  is  turned 
backward. 

The  same  arguments  apply,  though  with  less  force,  to  the 
case  of  a  notary. 

The  importance  of  uniformity  makes  this  question  seem 
eminently  fitted  to  test  the  value  of  the  suggestion  in  the  last 
paragraph  of  the  Preface  to  this  edition. 

§  277.  Cases  affirming  the  Liability  of  a  Bank  for  the  Negli- 
gence of  its  Correspondent  Bank.  —  England.  —  In  A  an  A\  art 
V.  Woolley,^  —  the  original  foundation  of  the  affirmance  of 
the  liability  of  the  first  bank  so  far  as  it  rests  on  author- 
ity,—  G.  in  America  drew  a  bill  on  D.  in  London,  and  A. 
sent  it  to  C.  in  Birmingham  on  account  of  purchases  made  by 
C.  in  England  for  A.  in  America.  C.  put  it  into  the  hands  of 
B.,  his  bankers  in  Birmingham,  for  collection,  who  forwarded 
it  to  L.,  their  correspondent  in  London.  D.  refused  to  accept, 
and  L.  failed  to  protest  or  give  notice  of  non-acceptance.  C. 
sued  B.  for  the  negligence  of  L.  Abbot,  C.  J.  said  :  "  Upon  this 
state  of  facts,  it  is  evident  that  the  defendants  (who  cannot  be 
distinguished  from  and  are  answerable  for  their  London  cor- 

1  §  277.     3  Barn.  &  C.  439. 
TOL.  I.  31  481 


§  277  THE    LIABILITY    OF    A    BANK. 

rcspondont)  have  been  guilty  of  a  neglect  of  the  duty  which 
they  owed  to  their  employer,  and  from  whom  they  received  a 
pecuniary  reward  for  their  services."  It  will  be  noticed  that 
this  is  a  mere  assertion  of  the  liability,  not  an  argument  for 
it,  and  is  entitled  only  to  the  weight  naturally  attaching  to 
any  utterance  of  the  learned  justice.  If  it  were  the  decision 
of  a  schoolboy  it  would  be  valueless,  for  it  lacks  the  innate 
force  of  reason.  And  when  we  go  further  into  the  case,  we 
shall  find  that  the  judge's  own  arguments  negative  his  conclu- 
sion upon  this  first  point.  Another  question  in  the  case  was 
how  much  C.  could  recover  from  B.  If  Chad  so  acted  as  to 
relieve  A.  from  liability  to  him  on  the  original  debt  for  which 
the  bill  was  sent,  C.  was  damaged  to  the  full  amount  of  the 
draft ;  but  if  he  still  had  his  remedy  against  A.  on  the  debt,  he 
was  damaged  only  by  the  delay. 

(a)  The  court  said  C.  had  not  so  treated  the  draft  as  to 
absolve  A.  He  could  not  have  been  expected  to  present  the 
bill  himself.  "  It  must  have  hee7i  understood  that  he  was  to  do 
this  through  the  medium  of  some  other  person.  Se  employed 
for  that  purpose  persons  in  the  habit  of  transacting  such  busi- 
ness for  himself  and  others,  and  upon  whose  punctuality  he 
might  reasonably  rely.  In  doing  this,  ive  think  he  did  all  that 
was  incumbent  upon  him  as  between  him  and  A. ;  that  he  is  per- 
sonally in  no  default  as  to  them,  and  is  not  answerable  to 
them  for  the  default  of  the  persons  whom  he  employed  under 
such  circumstances."  Now  A.  had  sent  the  bill  without  in- 
dorsing it,  and  was  therefore  not  entitled  to  notice  as  indorser, 
and  the  two  questions  in  the  case  were  therefore  techni- 
cally somewhat  different ;  but  fundamentally  both  questions 
amounted  simply  to  this  :  Shall  a  person  (X.)  be  held,  in  the 
absence  of  express  agreement,  to  liability  to  M.  for  loss  oc- 
casioned to  him  by  the  negligence  of  another,  not  the  servant 
of  X.,  when  M.  knew  that  by  the  course  of  business  and  usage 
of  trade  X.  would  have  to  employ  some  one,  and  X.  has  used 
due  care  in  the  selection  of  such  person  ? 

If  the  reason  given  in  Italics  was  sufficient  to  convince  the 
judge  that  substantial  justice  required  him  to  deny  such  lia- 
bility in  the  relation  between  C.  and  A.,  should  he  not  have  at 
482 


LIABILITY    FOR   CORRESPONDENT.  §  278 

least  given  some  reason  why  the  same  decision  was  not  ren- 
dered as  to  the  relation  between  C.  and  13..  where  in  the  nature 
of  things  the  same  argument  applies  ? 

(6)  However  void  of  expressed  reason  Van  Wart  v.  Woolley 
is,  it  is  no  doubt  law  in  England.  In  Mackersy  v.  Ramsays,^ 
Lord  Cottcnham  said :  "  If  there  was  any  negligence  in  the 
conduct  of  the  parties  actually  employed  to  receive  the  money, 
it  could  only  affect  those  by  whom  they  were  so  immediately 
employed,  for  certainly  they  were  not  the  agents  of  the  cus- 
tomer "  of  the  first  bank. 

§  278.  New  York.  —  The  next  case  in  line  is  that  of 
Allen  V.  Merchants'  Bank.^  A  bill  of  exchange  payable  at  a 
distant  place  was  deposited  in  the  defendant  bank  for  collec- 
tion. The  bank  forwarded  it  to  a  bank  in  that  place ;  which 
second  bank  put  it  into  the  hands  of  a  notary  to  present  for 
acceptance.  His  failure  to  give  notice  of  the  refusal  to  accept 
caused  a  loss.  The  first  trial  was  in  the  Supreme  Court,  and 
there  it  was  said  that  the  defendant  bank  undertook  only  to 
forward  to  proper  parties  for  collection ;  that  if  the  bank  to 
which  it  forwarded,  or  the  notary  employed  by  that  bank,  or 
other  subsequent  party,  committed  a  default,  the  depositor 
must  look  to  them ;  they  became  his  agents  directly,  and 
could  be  held  by  him ;  but  this  defendant  bank  was  not  re- 
sponsible to  him  for  what  happened  after  the  forwarding. 
The  cause  was  carried  by  appeal  before  the  Court  of  Errors, 
and  the  decision  of  the  Supreme  Court  was  there  reversed. 
But  it  was  reversed  by  a  small  majority ;  fourteen  senators, 
as  we  understand  the  report,  voting  for  the  reversal,  and  ten 
being  in  favor  of  sustaining  the  decision  of  the  lower  court. 
The  case  excited  much  interest,  and  all  the  arguments  which 
could  be  conceived  on  behalf  of  either  side  were  gathered  and 
put  forward  in  their  most  forcible  shape.  Senator  Yerplanck 
delivered  the  opinion  on  behalf  of  the  majority.  Chancellor 
Walworth  spoke  the  views  of  the  minority.  A  cause  so  thor- 
oughly considered  was  regarded  as  conclusively  settling  the 

2  Mackersy  v.  Ramsays,  9  C.  &  F.  818. 

1  §  278.  15  Wend.  481  (Supreme  Court) ;  22  Wend.  215  (reversal  in 
Court  of  Errors). 

483 


§  278  THE   LIABILITY   OF   A    BANK. 

huv  in  the  State  of  New  York.  Efforts  were  made  in  subse- 
quent cases  to  obtain  an  overruling-,  but  they  wore  of  no  effect. 
All  subsequent  cases  ^  have  consistently  upheld  the  doctrine 
of  Senator  Verplanck  and  his  thirteen  coadjutors,  and  the 
question  can  be  no  longer  considered  an  open  one  in  New 
York.  Though  it  should  perhaps  bo  added,  that  some  emi- 
nent judges — while  they  have  stated  that  they  considered  the 
question  as  res  adjudicata,  which  it  did  not  lie  with  them 
again  to  open  —  have  used  language  which  was  doubtless 
intended  to  intimate  that  the  adjudication  was  not  wholly 
satisfactory  to  them. 

(a)  Senator  Verplanck  cites  Van  "Wart  r.  Woolley  as  au- 
thority, and  pushes  aside  Washington  Bank  v.  Triplett,  as 
being  the  case  of  an  express  contract  for  transmission  only, 
and  not  for  collection,  which,  however,  we  shall  see,  was  not 
really  so. 

By  way  of  reasoning,  the  senator  remarks  that  a  mere 
representative  agency  ceases  with  the  personal  acts,  but  an 
agency  to  do  the  business  covers  all  the  means  em[)loycd,  and 
there  is  no  reason  to  consider  a  deposit  for  collection  in  an- 
other State  as  less  an  undertaking  to  do  the  business  than 
one  to  collect  in  the  same  town  ;  and  surely  a  bank  is  not  to 
be  relieved  from  responsibility  for  the  neglect  of  its  teller  in 
New  York  City  on  the  ground  that  he  was  carefully  selected, 
although  the  customer  knew  the  bank  must  collect  through 
agents. 

(5)  In  this  matter  the  senator  fails  to  distinguish  between 
cases  where  the  one  employed  is  the  servant  or  2^crmanent  em- 
ployee of  the  bank,  and  cases  where  the  person  employed  acts 
independently. 

In  the  case  of  a  servant,  the  law  of  to-day  inherits  from  the 
times  of  slavery  the  rule  that  holds  the  master  responsible, 
and  it  is  too  firmly  fixed  to  be  easily  overturned  ;  but  that  does 
not  justify  extension  of  such  liability  to  cases  not  within  the 

2  Downer  r.  Madison  County  Bank,  G  Hill,  618  (by  implication,  sup- 
ports 22  Weiid.  215);  Montgomery  County  Bank  v.   Albany  City  Bank, 
and  Montgomery  County  Bank  (;.  Bank  of  State  of  New  York,  7  N.  Y. 
459;  Commercial  Bank  v.  Union  Bank,  19  Barb.  391;  1  Kern.  203. 
484 


LIABILITY   FOR   CORRESPONDENT.  §  279 

iron  rule  of  precedent,  unless  a  good  reason  can  be  found  for 
so  doing. 

Assuming  that  a  contract  to  collect  through  a  correspond- 
ent is  not  a  case  of  personal  agency,  but  an  agreement  to  do 
the  business  that  "  covers  all  the  necessary  and  proper  means 
for  the  accomplishment  of  the  object,  by  whomsoever  used  or 
employed,"  is  begging  the  very  question  in  dispute.  Beside, 
this  language  would  cover  notaries  as  well  as  any  other 
"means,"  and  yet,  as  wc  shall  see,  authority  is  almost  in 
unison  that  the  bank  is  not  responsible  for  the  negligence 
of  a  notary  in  respect  to  demand  and  protest,  for  he  is  an 
independent  agent  whose  duties  are  prescribed  hy  law,  and 
the  hank  has  done  all  in  its  poiver  totvard  the  undertaking 
vjhen  it  selects  a  notary  ivith  reasonable  care. 

So  also  is  a  correspondent  bank  an  independent  agent, 
whose  duties  are  just  as  truly  prescribed  by  law ;  and  if  it  be 
said  the  notary's  good  conduct  is  secured  by  official  bond,  the 
answer  is,  that  this  is  not  the  ground  of  holding  the  bank 
free,  for  in  some  States,  Massachusetts  for  example,  where  the 
bank  is  not  held  for  the  negligence  of  its  notary,  no  bond  is 
required  ;  and  even  if  this  were  the  ground,  a  correspondent 
bank  is  probably  on  the  average  fully  as  responsible  financially 
as  a  notary  and  his  sureties. 

The  senator's  argument  seems  wofuUy  deficient  in  that  it 
takes  no  note  of  the  element  of  control  in  determining  liabil- 
ity, and  in  that  it  is  mere  assertion,  and  involves  the  fallacy  of 
"  Sufficient  Reason,"  (see  Mill's  System  of  Logic,  p.  464,)  that 
because  he  sees  no  reason  why  a  certain  thing  should  not  be 
so,  therefore  it  is  so,  and  clashes  with  the  whole  force  of  the 
law  as  to  notaries. 

§  279.  Ohio. —  The  court  in  Ohio  acknowledged  itself,  af- 
ter a  review  of  some  of  the  chief  authorities,  to  be  "  rather 
bewildered  by  the  conflict  than  aided";  but  consid- 

Ohio. 

ering  the  question  an  open  one,  it  preferred,  on  the 
whole,  to  follow  the  principle  finally  adopted  in  New  York.i 
This  court  also  took  the  ground  of  the  House  of  Lords   in 
Mackersy  v.  Ramsays,  though  here  there  was  no  such  special 
1  §  279.  Keeves  v.  State  Bank,  8  Ohio  St.  465. 

486 


§  280  THE    LIABILITY    OF    A    BANK. 

agreement  as  to  the  time  when  credit  was  to  be  given  to  the 
owner  as  there  had  been  in  that  case.  They  say  that  pay- 
ment to  the  collecting  bank  is  payment  to  the  first  bank,  and 
so  soon  as  the  payment  is  received  by  such  collecting  bank  the 
first  bank  becomes  at  once  a  debtor  to  the  owner  of  the  paper 
to  that  amount. 

§  280.  United  States  Cases.  —  The  undertaking  to  collect 
is  not  merely  a  contract  to  send  to  a  suitable  agent,  but  is 
an  undertaking  to  respond  for  any  default  of  the  agent 
selected.^ 

In  The  Exchange  National  Bank  v.  The  Third  National 
Bank,  the  United  States  Supreme  Court  decided  to  follow 
the  New  York  rule.  The  court  said :  The  bank's  "  under- 
taking is  to  do  this  thing,  not  merely  to  procure  it  to  be  done. 
In  such  a  case,  the  bank  is  held  to  agree  to  answer  for  any 
default  in  the  performance  of  its  contract,  and  whether  the 
paper  is  to  be  collected  in  the  place  where  the  bank  is  sit- 
uated, or  at  a  distance,  the  contract  is  to  use  the  proper 
means  to  collect  the  paper,  and  the  bank,  by  employing  sub- 
agents  to  perform  a  part  of  what  it  has  contracted  to  do, 
becomes  responsible  to  its  customer." 

The  nature  of  the  contract  is  the  test.  If  it  is  for.  imme- 
diate service  of  the  agent  and  for  his  faithful  conduct  as 
representing  his  principal,  the  responsibility  ceases  with  the 
limits  of  the  personal  service  undertaken,  but  where  the 
contract  looks  mainly  to  the  thing  to  be  done,  and  under- 
takes for  the  due  use  of  all  proper  means,  the  responsibility 
extends  to  all  necessary  and  proper  means,  by  whomsoever 
used. 

Whenever  the  agency  is  an  undertaking  to  do  the  business, 
the  original  principal  may  look  to  the  immediate  contractor 
with  himself,  and  is  not  obliged  to  look  to  inferior  or  distant 
under-contractors  or  sub-agents  when  defaults  occur  injurious 
to  his  interests.  "  On  any  other  rule  no  principal  contractor 
would  be  liable  for  the  default  of  his  own  agent,  where  from 
the  nature  of  the  business  it  was  evident  that  he  must  employ 
sub-agents." 

1  §  280.  Keut  V.  Dawson  Bank,  13  Blatchf.  237. 
486 


LIABILITY    FOR   CORRESPONDENT.  §  280 

(a)  This  is  simply  the  New  York  decision  over  again, 
Senator  Verplanck  verbatim  to  a  great  extent,  and  includes 
all  his  fallacies  and  some  others,  as  we  shall  see. 

The  last  sentence  queued  and  in  fact  the  whole  opinion  ut- 
terly ignores  the  well  settled  rules  of  law,  that  wliun;  an  agent 
has  authority,  either  expressly  given,  or  implied  from  the 
usage  of  trade,  or  the  course  of  his  own  dealings,  or  from  the 
exigencies  of  the  case,  to  employ  a  sub-agent,  and  does  so  em- 
ploy one  who  is  not  his  own  servant^  there  is  a  privity  between 
the  sub-agent  and  the  principal,  and  the  agent  is  not  respon- 
sible for  the  neglect  or  misconduct  of  the  sub-agent,  unless  by 
him  directed  or  ratified. 

The  parties  to  a  contract  are  presumed  to  contract  in  refer- 
ence to  well  established  usage,  in  this  particular  as  in  others.^ 
The  very  question  is  whether  the  contract  to  collect  can  be 
fairly  construed  to  be,  by  the  understanding  of  the  parties, 
an  agreement  that  the  first  bank  shall  personally  or  by  its 
servants  do  the  collecting  in  the  distant  city,  or  whether, 
considering  that  the  usage  of  trade  is  universal  and  well 
established  to  send  the  paper  to  some  correspondent  bank 
entirely  independent  of  the  first,  and  not  its  servant  any 
more  than  a  lawyer  is  the  servant  of  his  client,  and  con- 
sidering that  no  compensation  is  taken  by  the  first  bank  at 
all  commensurate  with  such  a  risk  as  that  of  loss  by  negli- 
gence of  the  sub-agents,  it  is  not  fairer  to  construe  the  con- 
tract intended  to  be  simply  one  of  transmission ;  and  if  so, 
then  the  question  arises.  Is  there  good  reason  on  any  other 
grounds  for  extending  the  liability  of  the  first  bank  beyond 
the  consequences  of  its  own  lack  of  due  care  and  that  of  its 
servants  ? 

The  court  does  not  give  any  reason  for  its  decision  that 
will  stand  analysis  for  a  moment ;  it  merely  says,  if  it  is  a 
contract  to  do  the  whole  business,  it  is  responsible  for  the 
sub-agents  it  employs  to  do  part  of  what  it  has  contracted  to 
do,  and  then  assumes  that  it  is  such  a  contract,  whereas 
all  the  sense  of  the  matter  is  that  the  bank  does  not  employ 
the  sub-agent  to  do  part  of  what  it  contracted  to  do  itself, 
2  Story  on  Agency,  §§  201,  217  a. 

487 


§  280  THE    LIABILITY    OF    A    BANK. 

but  that  in  the  light  of  usage  the  agreement  was  only  to 
employ  some  sub-agent  to  do  that  part  of  the  business. 

(6)  How  very  tissuey  the  opinion  is  we  shall  see  still  more 
clearly  on  noticing  Iho  manner  in  which  it  treats  Bank  of 
Washington  v.  Tri])lett,  saying  of  it,  "The  question  under 
consideration  (here)  was  not  presented  in  1  Pet.  25 ;  for  al- 
though the  defendant  bank  in  that  case  was  held  to  have 
contracted  directly  with  the  holder  of  the  bill  to  collect  it, 
the  negligence  alleged  was  the  negligence  of  its  own  officers 
in  the  place  where  the  bank  was  situated."  But  on  turning 
BMiik  of  to  the  Triplett  case  we  find  the  question  was  pre- 
V.  Triplett.  scutcd,  and  necessarily  presented,  and  was  dcciuca 
clearly  against  the  decision  in  Exchange  Bank  v.  Third  Na- 
tional Bank,  and  the  court,  perhaps  in  order  to  avoid  appear- 
ing to  overrule  so  clear  a  decision  of  C.  J.  Marshall,  disposes 
of  it  in  the  above  rather  misleading  way. 

The  Bank  of  Washington,  the  defendant,  was  the  corre- 
spondent bank,  and  being  sued  by  Triplett,  the  owner  of  the 
draft,  who  had  given  it  to  the  Mechanics'  Bank  to  collect, 
the  first  question  necessarily  was  whether  the  Washington 
Bank  was  the  agent  of  the  Mechanics'  Bank  or  of  Triplett, 
for  agents  are  not  liable  for  nonfeasance  or  omissions  except 
to  their  own  principals ;  ^  the  matter  was  one  of  contract,  and 
privity  was  necessary  between  Triplett  and  Bank  of  Wash- 
ington in  order  to  hold  the  latter. 

(<?)  The  defendant  in  fact  insisted  that  there  was  no 
privity  between  the  holder  and  itself,  that  it  was  not  the 
agent  of  Triplett  but  of  the  Mechanics'  Bank,  and  the  court 
said,  "  The  deposit  of  a  bill  in  one  bank,  to  be  transmitted 
for  collection  to  another,  is  a  common  usage  of  great  public 
convenience,  the  effect  of  which  is  well  understood.  This 
transaction  was  unquestionably  of  that  character.  The  cus- 
tom to  indorse  a  bill  put  in  bank  for  collection  is  universal, 
and  the  Bank  of  Washington  had  no  more  reason  for  sup- 
posing that  Triplett  had  ceased  to  be  the  real  liolder  from 
such  indorsement  (in  blank)  than  for  supposing  that  the 
cashier   of   the    Bank    of   Washington  had  become  the  real 

8  Story  on  Agency,  §  310. 

488 


LIABILITY    FOR   CORRESPONDENT.  §  282 

holder  by  the  indorsement  to  him  (by  the  Mechanics'  Bank). 
It  is  the  customary  proceeding  for  collection  in  such  cases. 
.  .  .  The  court  is  decidedly  of  the  opinion  that  the  Bank  of 
Washinp:ton,  by  receiving  the  bill  for  collection,  became  the 
agent  of  Triplctt." 

(^)  We  see  that  C.  J.  Marshall  uses  the  words  "  for 
transmission "  and  "  for  collection "  interchangeably  in  re- 
gard to  the  same  transaction ;  and  indeed  the  facts  of  this 
case  "were  the  same  as  in  all  the  other  cases,  and  the  use 
of  the  word  "  transmission "  merely  expresses  the  view  the 
court  takes  of  the  facts,  and  we  see  that  the  court  does 
emphatically  declare  the  correspondent  bank  to  be  the  agent 
of  the  holder.  So  that  Exchange  Bank  v.  Third  National 
Bank  really  overrules  C.  J.  Marshall,  and  with  no  reason 
expressed  that  will  bear  the  light,  though  it  is  probable  the 
Judges  had  some  reason  which  did  not  shape  itself  into 
words. 

The  cases  are  rather  unsatisfactory.  The  United  States 
is  based  on  New  York,  and  New  York  on  Van  Wart  v. 
Woollcy,  plus  fallacy,  with  probably  a  feeling  of  public  con- 
venience and  policy  which  did  not  find  expression. 

Cases  Denying  the  Liability  of  a  Bank  for  the  Negligence 
of  its   Correspondent. 

§  281.  United  States.  —  The  authority  of  Chief  Justice  Mar- 
shall rests  upon  this  side  of  the  question ;  see  his  decision  in 
Bank  of  Washington  v.  Triplett,^  discussed  above,  §  280  c. 

§  282.  New  York.  —  Although  the  actual  decision  was,  by 
four  votes  out  of  twenty-four,  that  tlie  first  bank  shall  be  lia- 
ble, yet  the  weighty  dissent  of  Chancellor  Walworth  is  entitled 
to  notice  on  this  side  of  the  question.     His  arguments  are, — 

(1)  That  there  is  no  consideration  taken  by  the  principal 
bank  beyond  the  exchange  and  expenses  of  negotiation ;  often 
the  whole  labor  and  expense,  except  the  mere  exchange,  is 
borne  by  the  bank  in  order  to  draw  business,  and  there  is  no 
consideration  taken  to  cover  the  risk  of  loss  of  the  whole 
amount  of  the  paper  by  the  negligence  of  a  correspondent,  as 
1  §  281.  1  Pet.  25. 

489 


§  283  THE   LIARILITY   OF    A    BANK. 

it  is  certainly  reasonable  to  suppose  there  would  be  if  any 
such  risk  was  contemplated  by  the  parties. 

(2)  The  loss  should  fall  on  the  owner,  who  has  impliedly 
authorized  the  employer  of  a  sub-agent,  by  entering  into  a 
contract  in  the  performance  of  which  such  employment  of  a 
sub-agent  is  an  established  usage,  and  not  providing  against 
the  inference  of  law  that  he  contracted  in  reference  to  such 
usage  by  any  express  term  in  his  contract. 

§  283.  Pennsylvania.  —  In  Pennsylvania  the  law  is  strongly 
stated  against  the  liability  of  a  bank  for  its  correspondent.^ 

"  A  bank  with  which  a  check  is  deposited  by  a  customer 
for  collection,  under  an  agreement  that  the  depositor's  respon- 
sibility as  indorser  is  to  continue  until  payment  is  ascertained 
by  the  bank,  is  bound  to  transmit  such  check  to  an  indepen- 
dent agent  for  collection,  with  instructions  to  present  the 
same  for  payment,  and,  if  payment  be  refused,  to  have  the 
same  protested  and  returned  at  once." 

The  agreement  to  transmit  for  collection  is  a  contract  be- 
tween the  bank  and  its  customer ;  the  valuable  consideration 
which  supports  the  agreement  as  a  contract  is  the  use  of  the 
money  to  be  collected  by  the  bank  as  long  as  it  shall  be 
allowed  to  remain  in  their  hands  after  it  is  collected.  This 
binds  the  collecting  bank  to  do  all  that  is  incumbent  on  them 
to  do ;  and  that  entire  duty,  as  we  have  said,  is  discharged 
when  the  check  or  draft  is  transmitted  to  a  responsible  sub- 
agent  to  collect  the  money.  The  agent  to  whom  the  instru- 
ment is  sent  to  make  demand  for  payment  then  becomes  the 
agent  of  the  depositor  or  indorser,  and  is  liable  to  such  de- 
positor for  loss  arising  from  failure  on  his  part  to  perform 
the  duty  which  is  incident  to  an  undertaking  to  collect  the 
money ;  and  such  duty  is  not  discharged  when  anything  but 
money  is  accepted  as  payment,  in  the  absence  of  special  au- 
thority to  the  contrary. 

The  law,  as  we  have  stated  it,  is  well  settled  on  the  authority 
of  decided  cases  in  this  country. 

"Triplett,  having  deposited  a  bill  with  a  hank  in  Alexandria 
to  be  collected  in  AVashington,  the  Alexandria  bank  forwarded 
1  §  283.  Merchants'  National  Bank  v.  Goodman,  109  Pa.  St.  422. 

490 


LIABILITY    FOR   CORRESPONDENT.  §  283 

the  bill  to  the  Bank  of  Washington,  which  by  negligence 
failed  to  collect  the  bill."  By  transmitting  the  bill,  as  di- 
rected, the  bank  with  whom  it  was  deposited  performed  its 
duty,  and  the  whole  responsibility  of  the  collection  devolved 
on  the  bank  which  received  the  bill  for  the  purpose.  To  the 
same  effect  are  23  Pickering,  330 ;  1  Gushing,  182 ;  12  Conn. 
303 ;  25  111.  247 ;  1  Otto,  308. 

In  Pennsylvania,  in  1834,  the  court  said :  The  undertaking 
of  the  first  bank  is  clearly  to  transmit  the  bills ;  that  this  was 
the  intention  of  both  parties  must  be  inferred  from  the  trans- 
action. This  bank  is  used  simply  as  a  "  medium  of  commu- 
nication." If  the  plaintiff  contended  that  it  undertook  "  to 
collect,''^  that  was  a  material  fact  which  should  have  been 
passed  upon  by  the  jury.  Hence  the  banks  do  not  stand  in 
the  relation  of  principal  and  agent  towards  each  other.  But 
the  first  is  the  agent  for  transmission ;  the  second  is  the 
agent  for  collection ;  ergo,  the  first  is  not  bound  to  answer  for 
the  doings  of  the  second.^  In  1848  the  same  view  was  inci- 
dentally adopted.^  In  Bellemire  v.  United  States  Bank,*  the 
same  ground  was  gone  over  in  both  the  lower  and  the  highest 
courts  of  the  State  with  the  same  result.  The  ruling  in  Me- 
chanics' Bank  v.  Earp  was  deliberately  repeated  and  affirmed 
as  being  the  law  in  Pennsylvania.  It  was  urged  that  the 
bank  had  undertaken  "  the  whole  business  of  collection,"  and 
in  proof  of  this  it  was  shown  that  the  paper  had  been  indorsed 
over  to  the  bank  by  an  unrestricted  indorsement.  But  the 
court  considered  that,  though  the  bank  was  holden  by  such  an 
indorsement,  its  situation  was  rendered  in  no  respect  peculiar 
by  this  fact.  It  was  invested  with  the  apparent  ownership 
only  that  it  might  have  authority  to  present  for  payment. 
As  simple  agent  it  was  held  only  to  act  in  good  faith  and 
"  according  to  the  regular  and  accustomed  course  of  the  busi- 
ness ;  and  was  not  responsible  though  such  action  might  not 
prove  to  be  to  the  best  advantage."  The  bank,  from  its 
nature,  is  obliged  to  employ  agents,  in  this  case  a  notary,  who 

2  IMechanics'  Bank  v.  Earp,  4  Rawle,  384. 

*  Wingate  v.  Mechanics'  Bank,  10  Barr,  104. 

*  1  Miles,  173;  4  Whart.  105. 

491 


§  285  THE   LIABILITY    OF    A    BANK. 

is  not  alleged  to  have  been  incompetent.  The  owner  of  the 
paper,  in  omitting  to  desire  a  special  agent  to  be  employed, 
consented  to  let  the  matter  take  the  ordinary  course,  and 
the  bank  performed  its  duty  in  committing  the  paper  to  the 
hands  of  the  person  whom  it  employed  in  its  own  like 
concerns. 

§  284.  Iowa.  —  Where  the  holder  of  a  bill  of  exchange 
payable  at  a  distant  place  deposits  it  with  a  local  bank  for 
collection,  he  thereby  assents  to  the  course  of  business  of 
banks  to  collect  through  correspondents,  and  the  correspond- 
ent of  the  local  bank  to  which  the  bill  is  forwarded  becomes 
his  agent,  and  is  responsible  to  him  directly  for  negligence 
in  failing  to  present  the  bill  for  ])aymont  in  the  proper  time.^ 

§  285.  Mississippi. — A  bank  receiving  a  draft  for  collection 
at  another  place,  and  transmitting  the  draft  to  its  agent  care- 
fully selected  at  the  acceptor's  residence,  is  not  liable  for  the 
agent's  neglect.^ 

In  this  case  the  court  followed  a  line  of  decisions  ^  in  the 
same  State,  and  referred  to  those  of  eight  States  ^  in  agree- 
ment with  its  conclusion.  The  chief  justice  dissented,  quoting 
cases,*  which,  as  we  have  seen,  have  no  bearing  on  the  ques- 
tion, because  in  each  of  them  the  sub-agent  was  the  servant 
of  the  agent  in  chief,  or  in  his  permanent  employ  and  under 
his  control  and  direction,  really  one  of  his  own  arms,  attached 
to  the  main  body,  and  not  an  independent  person,  and  in 
most  of  them  the  express  terms  of  the  contract  indicated  that 
the  undertaking  was  to  do  the  collecting  in  the  distant  place 
through  its  oivn  hra7iches  and  permanent  agencies,  and  the 

^  §284.  Guelick  v.  National  State  Bank  of  Burlington,  56  Iowa,  434 
(1881). 

^  §  285.  Third  National  Bank  of  Louisville  v.  Vicksburg  Bank,  61 
^liss.  112  (188:5). 

2  Hoover  v.  Wise,  91  U.  S.  308(1875);  Bradstreet  v.  Everson,  72  Pa. 
bt.  124  (1872);  Morgan  v.  Tener,  83  Pa.  St.  305. 

^  Massachusetts,  Maryland,  Connecticut,  IMissouri,  Illinois,  Iowa,  Ten- 
nessee, and  AVisconsin. 

*  Tiernan  v.  Commercial  Bank,  7  How.  648;  Agricultural  Bank  v. 
Commercial  Bank,  7  Sm.  &  M.  592  ;  Bowling  t;.  Arthur,  34  Miss.  41. 
These  were  notary  cases,  but  the  reasoning  was  general. 

492 


LIABILITY    FOR   CORRESPONDENT.  §  287 

consideration  for  the  collection  also  was  not  of  the  meagre 
cluuauter  vviiich  so  strongly  excludes  the  supposition  that  the 
agent  intended  to  take  the  risk  of  losing  the  principal. 

§  286.  Massachusetts.  —  In  Massachusetts  it  was  held,  in 
1848,  that  \i  the  lirst  bank  selects  proi)cr  sub-agents  for  ac- 
complishing the  transmission  and  making  the  collection,  it 
discharges  its  full  duty,  and  is  not  liable  for  their  default. 
If  the  note  has  been  indorsed  over  to  it  generally,  it  may  in- 
dorse over  to  sub-agents  in  the  same  form,  and  need  not 
make  a  restricted  indorsement.  In  delivering  the  opinion, 
Judge  Wilde  said  that  the  final  decision  in  Allen  v.  ]\Ier- 
chants'  Bank  {mpra)  "  is  opposed  to  a  number  of  decisions 
of  great  authority,  and  is  not,  as  we  think,  well  founded  in 
principle."  ^ 

The  employment  of  a  sub-agent  is  justifiable,  because  this 
manner  of  conducting  business  is  the  usual  and  known  cus- 
tom, and  "  in  a  business  which  requires  or  justifies  the  dele- 
gation of  an  agent's  authority  to  a  sub-agent,  who  is  not  his 
own  servant,  the  original  agent  is  not  liable  for  the  errors  or 
misconduct  of  the  sub-agent  if  he  has  exercised  due  care  in 
the  selection."  2 

§  287.  other  States.  —  In  Connecticut  the  court  said,  in  the 
first  case  which  they  were  called  upon  to  consider,  that  of  Law- 
rence V.  Stonington  Bank,i  that  the  trammittee  bank   ^         .    ^ 

"  '  ,     .  Connecticut. 

was  the  attorney,  not  the  factor,  of  the  transmitting 
bank,  and  had  for  its  principal  not  the  transmitting  bank  itself, 
but  the  original  holder  and  depositor  of  the  paper ;  whence  it 
followed  that  the  defaults  of  each  bank  in  the  order  of  suc- 
cession were  not  the  defaults  of  any  predecessor  in  the  trans- 
mission, but  of  the  original  customer  and  principal  himself. 
Later,  the  same  court  declared  that  a  person  who  deposits  in 
a  bank  a  note  which  is  payable  elsewhere  must  know  that  all 
the  bank  can  do  is  to  send  it  on  to  a  reputable  correspondent ; 
and  if  the  bank  does  this,  it  should  be  thereby  fully  exonerated. 

1  §  286.  Dorchester  &  Milton  Bank  v.  Xew  England  Bank,  1  Cush. 
177;  Fabens  v.  Mercantile  Bank,  23  Pick.  330. 

2  Darling  i".  Stanwood,  14  Allen,  504. 
1  §  287.    6  Conn.  521. 

493 


§  287  THE   LIABILITY    OF    A    BANK. 

It  would  be  an  unreasonable  hardship  to  hold  the  bank  for  the 
defaults  of  such  further  aircnts.^     In  Louisiana  it 

Louisiana.  i       i        i     i  ,     .^    . 

has  been  held  that  the  bank  does  enough  it  it  gives 
the  note  to  its  regular  notary,  and  is  not  liable  for  his  default.^ 
In  Illinois  it  was  said  that  a  bank  was  not  liable 
for  the  default  of  the  sub-agent,  if  it  had  exercised 
due  diligence  in  the  selection.^     The  same  doctrine  is  adopted 
by  a  fair  implication  in  the  ruling  in  the  Wisconsin 
case,  cited  in  the  margin.^     In  Maryland  the  first 
bank  is  not  regarded  as  liable  for  defaults  of   sub-agents, 
whether  banks  or  notaries ;   but  it  is  fair  to  say 
^^^   "  '      that  the  first  decision  was  based  on  proof  of  usage 
in  the  State,  or  at  least  in  the  city  of  Baltimore.*^     The  same 
view  has  recently  been   directly  asserted  in  Mis- 
souri;'^ and  the  tendency  of  the  court  might  pre- 
viously have  been  inferred  to  be  in  favor  of  it,  from  the  form 
of  the  opinion  and  the  language  used  therein,  delivered  in 
the  case  of  Gerhardt  v.  Boatman's  Savings  Institution.^ 

2  East  Iladdam  Bank  v.  Scovil,  12  Conn.  303. 

8  Hyde  v.   Planters'  Bank,   17  La.  560;   Baldwin  v.  Bank  of  Louis- 
ville, 1  La.  An.  13. 

*  iEtna  Insurance  Co.  v.  Alton  City  Bank,  25  111.  243. 

6  Stacy  V.  Dane  County  Bank,  12  Wis.  629. 

^  Jackson  v.  Union  Bank,  6  Har.  &  J.  146;  Citizens'  Bank  v.  Howell, 
8  Md.  530. 

">  Daly  V.  Butchers  &  Drovers'  Bank  of  St.  Louis,  56  Mo.  94. 

8  38  Mo.  60. 
494 


CHAPTER  XVIII. 

GENERAL   DEPOSIT. 

§  288.  Analysis.     §§  186,  565,  Title. 

A  deposit  of  loose  money  is  presumed  to  be  general. 

§  289.  The  relation  of  the  bank  to  the  depositor  of  good  money  is  that 

of  debtor  and  creditor.     Upon  crediting  the  deposit,  tlie  bank  is 

liable  to  the  depositor,  though  the  deposit  should  be  lost  or  stolen 

without  its  fault ;  the  deposit  becomes,  in  every  sense,  its  prop- 

§  289  b.  erty  ;  if  it  makes  a  payment  on  account  of  it,  it  is  its  own  money 

that  is  paid ;  and  if  the  bank  becomes 
§  289  c.        Insolvent,  the  depositor  cannot  claim  in  preference  to  the  general 
creditors,  unless  the  deposit  was  not  fully  received,  or  the  receiv- 
ing was  a  fraud  upon  the  depositor.     §  6"J9. 
(d)  Forged  paper  or  counterfeit  coin  is  nothing,  and  cannot  form  a  de- 
posit; though,  if  a  bank  is  negligent  in  not  discovering  a  forgery 
of  its  own  bills,  it  will  have  to  bear  any  resulting  loss,  in  the 
absence  of  fraud  on  the  depositor's  part.     §  659. 
Bills  of  an  insolvent  bank  are,  according  to  the  best  opinion,  re- 
ceived at  the  risk  of  the  bank,  if  there  is  no  fraud  or  concealment 
on  the  part  of  the  depositor.     §§  633,  662. 
Checks  on  the  depository  bank,  credited  as  cash,  create  the  rela- 
tion of  debtor  and  creditor,  and  the  title  passes  to  the  bank,  unless 
the  depositor  knew  the  check  was  not  good  for  lack  of  funds. 
§565. 
Checks  on  other  banks,  notes,  bills,  &c.,  merely  credited  as  cash, 
without  further  agreement,  become  a  general  deposit  as  against 
the  depositor,  if  he  knows  they  are  so  credited ;  but  as  against  the 
bank  the  credit  is  conditional,  and  may  be  cancelled  if  the  paper 
is  not  paid  at  maturity  without  default.    §  565.  ' 
Paper,  credited  as  paper,  is  not  a  general  deposit. 
§  289  d.        Fraud  or  concealment  on  the  part  of  the  depositor  will  vitiate  the 
contract  of  deposit,  and  make  it  voidable  at  the  option  of  the 
bank. 
§  289  e.         Suits  by  depositors. 

Writings  in  the  Course  of  Banking  Business. 
§  290.  Deposit  tickets,  pass-books,  books  of  the  bank,  and  their  effect. 

All  entries  and  written  statements  contained  in  the  above,  made  in 

§291.  the  course  of  business,  are  merely /^n'mfz  yhae  evidence,  and  are 

(c)       subject  to  control  by  parol.     The  books  of  the  bank  are  more 

§  295.  open  to  error  than  the  pass-books,  for  these  last  usually  contain 

original  entries  made  at  the  time  of  deposit,  while  the  books  of 

495 


§  289  GENERAL   DEPOSIT. 

the  bank  are  written  up  afterward  by  copying,  so  admitting  of 
more  chance  of  error. 

§  295  f.  Parol  is  admissible  to  supply  tlie  place  of  a  record  in  the  books  of 
the  bank,  even  though  statute  law  requires  the  bank  to  keep  a 
record  of  transactions  of  tiio  nature  of  the  one  to  be  proved,  and 
this  has  not  been  done. 

§  295  e.        Entries  are  conipetent  evidence  of  the  nature  of  a  deposit,  as  gen- 
eral, special,  or  specific. 
Are  admissible  in  favor  of  bank.     §  295.     Or  against  it.     §  171  i". 

§§  290,  291.  Mistakes  may  be  corrected  by  either  party,  subject  to  the  rule  that 
each  party  must  bear  any  loss  resulting  to  the  other  by  reason  of 
acting  on  the  faith  of  an  entry  made  by  him,  or  his  negligent 
acquiescence. 

§  291.  No  by-law  of  the  bank  can  destroy  this  right  of  correction  in  the 

depositor.     Nothing  short  of  express  agreement  will  suffice. 

§  292.  Silence  may  estop  the  depositor  as  to  charges  actually  made  in  ac- 

counts stated  to  him,  but  cannot  give  authority  for  future  similar 
charges. 

§  295.  The  name  in  the  bank-book  is  not  conclusive  as  to  the  ownership  of 

tlie  deposit. 
Proof  of  entries  should  be  by  the  entering  clerk,  if  possible. 

§  294.  Right  of  depositor  to  inspect  books  is  confined  to  such  portions  as 

concern  his  own  transactions  with  the  bank. 

§  294  a.        Riglit  of  otiiers  to  know  the  state  of  a  depositor's  account  is  con- 

(1)  ceded  in  the  case  of  a  garnishee  creditor,  but  has  been  denied  as 

(2)  to  check-liolders  and  as  to  third  persons  in  general.  This,  so  far 
as  concerns  a  check-holder  in  case  of  insufficient  funds,  is  ques- 
tionable. The  depositor  has  transferred  to  him  his  own  right  in 
the  deposit,  right  of  inquiry  and  all ;  it  is  his  (the  check-holder's) 
deposit  on  presentation  of  the  check,  if  he  sees  fit  to  accept  it,  and 
lie  may  not  be  able  to  decide  that  until  he  knows  the  amount. 

§  296.   Certificate  of  Deposit.     (See  Analysis,  §  296.) 
§  309.   Interest  Accounts. 

A  general  deposit  bears  no  interest  except  by 

(1)  (6)  Agreement. 

(2)  Usage  or  course  of  dealing. 

{?,)        After  unjustifiable  delay  or  refusal  of  payment. 
{h)  Usury  Laws  cannot  be  overcome  by  usage.     (So  it  is  said  by  the 

judges,  in  spite  of  the  fact  that  discounting  and  "rests,"  which 

by  force  of  usage  have  claimed  and  secured  recognition  by  the 

law,  do  circumvent  the  usury  laws.) 
[d\  Death,  Insolvency,  or  Settlement  terminates  a  contract  as  to 

rate  of  interest  on  a  deposit,  and  thereafter  interest  is  calculated 

at  tlie  ordinary  rate  for  simple  debt. 
§  310.   Payment  of  Deposits.     (See  Analysis,  §  310.) 
§  327.  Appropriation  of. 

§  289.    Relation    of    the  Customer    on   a  simple  Deposit  Ac- 
count. —  The  ordinary  relation  existing  between  a  bank  and 
49G 


THE   BANK    IS    DEBTOR.  §  289 

its  customer,  if  not  complicated  by  any  further  transaction 
than  that  of  the  depositinjj:  and  witlidrawin^  of  moneys  by 
the  customer  from  time  to  time,  is  simply  that  of  debtor  and 
creditor  at  common  law,^  whether  the  deposit  is  on   jhg,,a„jji 
demand  or  on  time."'^     The  orij'-iual  and  every  subse-    ''^'^i'-  ^^^ 
quent  deposit  by  the  customer  is  in  strict  legal  effect   though  lost 
a  loan  by  the  customer  to  the  bank,  and  e  converso 
every  payment  by  the  bank  to  or  on  account  of  the  customer 
is  a  repayment  of  the  loans  pj'o  tanto. 

All  sums  paid  into  the  bank  on  general  deposit  by  the  same 
or  different  depositors  form  one  blended  fund.^  So  soon  as 
the  money  has  been  handed  over  by  the  payer,  it  is  at  once 
the  proper  money  of  the  bank.*  It  enters  into  the  general 
fund  and  capital,  and  is  nndistinguishablc  therefrom.  There- 
after the  depositor  has  only  a  debt  owing  him  from  the  bank ; 
a  chose  in  action,  not  any  specific  money,  or  a  right  to  any 
specific  money .^ 

(a)  A  bank  may  assume  the  functions  of  trustee,  quasi 
trustee,  factor,  or  agent,  as  we  have  seen ;  ^  but  as  to  a  simple 
deposit  for  general  credit  all  efforts  to  hold  the  bank  to  the 
duties  of  these  relations  have  failed  both  in  England  and  the 
United  States,  the  courts  uniformly  holding  the  relation  to  be 
that  of  debtor  and  creditor.''' 

1  §289.  Bank  of  Republic  v.  Millard,  10  Wall.  152;  Neely  v.  Rood, 
54  Mich.  134;  Perley  v.  ;Miiskegon  Coxuity,  o2  Mich.  132  (1875);  Com- 
mercial Bank  v.  Hughes,  17  Wend.  100;  Foley  v.  Hill,  2  11.  L.  Cas.  28. 

'^  Williams  r.  Rogers,  14  Bush,  788. 

3  Devaynes  v.  Noble,  1  Mer.  541;  Bodenham  i\  Purchas,  2  Barn.  & 
Aid.  39;  Henniker  v.  Wigg,  4  Q  B.  (Ad.  &  El.)  792;  Commercial  Bank 
of  Albany  ?'.  Hughes,  17  Wend.  94. 

*  Seward  County  Commissioners  v.  Cottle,  14  Neb.  144. 

6  Marine  Bank  v.  Fulton  Bank,  2  Wall.  252;  Thompson  r.  Riggs,  5 
Wall.  663;  National  Bank  of  Republic  v.  Millard,  10  Wall.  152;  yEtna 
National  Bank  v.  Fourth  National  Bank,  40  N.  Y.  82;  Carr  u.  National 
Security  Bank,  107  Mass.  45;  First  National  Bank  v.  Ocean  National 
Bank,  6  N.  Y.  278. 

^  See  Grant  on  Bankers  and  Banking.  3d  ed.,  pp  5.  11;  Cros.skill  r. 
Bower,  32  Beav.  8G;  .32  L.  J.  Ch.  540;  Shiells  i-.  Blackburne,  1  H.  Bl. 
158  (per  Lord  Loughborough). 

7  English  Cases:  Foley  v.   Hill,  2  H.  L.  Cas.  39;  Crosskill  c.  Bower, 

VOL.  I.  32  497 


§   289  GENERAL    DEPOSIT. 

It  follows  that,  the  act  of  deposit  having  been  once  consum- 
mated, nothing  short  of  payment  on  the  part  of  the  bank,  or 
some  act  of  the  depositor  himself,  will  suffice  to  exonerate 
it  from  the  indebtedness  it  has  assumed.  The  identical  Ijajr 
of  coin  or  roll  of  bills  in  which  the  deposit  was  made  may 
be  stolen,  before  it  has  been  in  any  practical  manner  com- 
mingled with  the  funds  of  the  bank  ;  it  may  be  embezzled  or 
fraudulently  misapplied  by  an  officer  of  the  bank  ;  still  the 
indebtedness  of  the  bank  subsists,  entirely  unaltered  by  those 
circumstances.  Neither  the  intentional  nor  the  accidental 
segregation  of  the  specific  moneys  (unless  by  distinct  agree- 
ment with  the  depositor  a  "  special  deposit  "  is  effected  ^)  will 
enable  the  bank  to  follow  them,  and  to  affect  its  customer 
with  their  fate.^ 

(Z»)  It  also  results  that  the  true  owner  of  a  general  deposit 
cannot  follow  a  payment  made  out  of  it,  for  it  is  the  money  of 
the  bank  that  is  paid.     §§  565,  567,  621. 

D.  drew  on  his  debtor,  H,,  and  sent  the  draft  to  bank  B. 
for  collection.  II.  paid  a  part  properly,  and  directed  the  bank 
True  owner  wlicrc  the  firm  of  H.  and  S.  had  their  deposit  to 
poslt'cannot^  V^J  ^^^^  remainder  from  this  deposit,  which  was 
I'^r'ih^tLrarr  done.  Held,  that  neither  the  firm  nor  S,  could  re- 
fi'de  holder,     covcr  from  D.     D.  did  not  receive  any  money  of 

32  Beav.  86;  Carr  v.  Carr,  1  Mer.  541,  n.  ;  Bishop  v.  Countess  of  Jersey, 
2  Drew.  143;  Devaynes  v.  Noble,  1  ]\Ier.  511;  Bellamy  y.  Majoribanks, 
8  Eng.  L.  &  Eq.  517;  Sims  v.  Bond,  6  Barn.  &  Ad.  392;  2  Nev.  &  Man. 
608;  Watts  t;.  Christie,  11  Beav.  546;  Pott  v.  Clegg,  16  M.  &  W.  321; 
In  re  Agra  &  ]\fasterman's  Bank,  Ex  parte  Waring,  36  L.  J.  Ch.  151; 
Grant  on  Bankers  and  Banking,  p.  4.  American  cases:  National  Bank 
V.  Eliot  Bank  (in  which,  however,  there  is  a  long  dissenting  opinion, 
delivered  by  Abbott,  J.),  20  Law  Rep.  138;  Commercial  Bank  of  Albany 
V.  Hughes,  17  Wend.  94;  BuUard  v.  Randall,  1  Gray,  605;  Chapman  v. 
White,  2  Seld.  412;  Downes  v.  Phoenix  Bank,  6  Mill,  297;  Foster  v. 
Essex  Bank,  17  Mass.  479 ;  Bank  of  Northern  Liberties  v.  Jones,  42  Pa. 
St.  536;  Marsh  v.  Oneida  Central  Bank,  34  Barb.  298  (citing  many  au- 
thorities); Curtis  V.  Leavitt,  15  N.  Y.  9;  Bank  of  the  Republic  v.  Millard, 
10  Wall.  152. 

8  Marine  Bank  v.  Fulton  Bank.  2  Wall.  252. 

'  Concord  v.  Concord  Bank,  16  N.  H.  26;  Commercial  Bank  of  Albany 
V.  Hughe."?,  17  Wend.  94. 
498 


RELATION  OF  BANK  AND  DEPOSITOR.        §  289 

the  firm,  for  the  money  on  deposit  in  the  bank  was  not  the 
firm's  money,  but  the  bank's. i" 

(c)  The  rckition  of  the  dci)Ositor  to  the  bank  being  that  of 
a  simple  creditor,  if  the  bank  goes  into  insolvency  the  deposi- 
tor has  no  right  to  any  preference  ;  but  shall  come    insolvency. 
in  like  any  other  ordinary  creditor."     But  if  a  de-   J'^';[',^f;,"'^'^' 
posit  is  never  really  received  by  the  bank,  it  may    hours  kept 

'  ,  •       i_     .1  T       separate.  &c. 

be  recovered  by  the  owner  as  agamst  the  crcdi-  sl-c§§565, 
tors  of  the  bank  upon  its  failure ;  as  where  the  de- 
])Osit  was  kept  se})arate  and  not  credited,  it  being  paid  in  after 
hanking  hours  on  the  day  before  failure  ^^  (the  bank  did  not 
again  open  after  receiving  the  deposit).  But  where  it  has 
been  customary  to  make  deposits  after  banking  hours  and 
treat  them  as  proper  deposits,  and  a  deposit  is  received  as 
usual,  subsequent  insolvency  cannot  affect  the  case.^s  ^^nd 
even  insolvency  (actual  but  not  yet  avowed)  at  the  time  of 
receiving  a  deposit,  whether  known  or  not  to  the  officers  of 
the  bank,  will  not  prevent  the  property  from  passing  to  the 
bank,  unless  the  reception  of  it  amounts  to  a  fraud  on  the 
depositor.     (§  629.) 

(f?)  If  the  deposit  be  made  in  forged  paper  or  in  base 
coin,  although  the  nominal  amount  be  duly  passed  to  the  de- 
positor's credit,  yet  no  indebtedness  shall  accrue  ;   ^ 

'  '  ''  ,         ,  Deposit  in 

for  a  deposit  made  in  such  material  is  not  a  pay-  forKod  paper 
ment,  and  can  in  no  wise  effect  the  relationship 
previously  existing  between  the  parties.  It  goes  absolutely 
for  nothing ;  and  as  it  is  a  familiar  rule  that  the  transfer  of 
such  worthless  stuff  could  not  discharge  a  debt,  so,  on  the 
other  hand,  it  is  equally  clear  that  it  cannot  create  one.^* 
If  a  bank  receives  its  own  pretended  bills,  it  cannot    ob- 

"  Davis  V.  Smith,  29  Minn.  201  (1882). 

"  In  re  Franklin  Bank,  1  Paige,  249. 

12  Threlfal  v.  Giles,  cited  2  INI.  &  Rob.  492;  Sadler  v.  Belcher,  id.  489. 

"  Ex  parte  Chitton,  1  Fonb.  167. 

"  Bank  of  United  States  v.  Bank  of  Georgia,  10  Wheat.  333;  Corbit  r. 
Bank  of  Smyrna,  2  Harr.  235;  Gloucester  Bank  v.  Salem  Bank,  17 
Mass.  33;  Jones  r.  Ryde,  5  Taunt.  488;  1  Com.  Law,  1G6;  Markle  v. 
Hatfield,  2  Johns.  455;  Young  v.  Adams,  6  Mass.  182;  Willson  v.  Foree, 
6  Johns.  110. 

499 


§  289  GENERAL   DEPOSIT. 

jcct  after  it  has  allowed  several  days  to  go  by,  for  it  should 
Forged  bills  knovv  its  owu  bilLs.^^  This,  however,  is  not  in  ac- 
JI)8itor^'  cord  with  the  best  views  on  this  subject,  unless  it 
§§  033,  659.  |)e  added  that  its  failure  to  discover  the  forgery  is 
through  negligence,  and  that  correction  of  the  error  would 
leave  the  depositor  in  a  worse  position  than  if  the  bills  had 
been  refused.  A  forged  promise  is  no  promise,  it  lacks  the 
consent  necessary  to  a  contract ;  receiving  it  without  knowing 
the  facts  cannot  be  a  ratification,  and  the  only  other  ground  of 
holding  the  bank  is  neglect  and  damage. 

If  bills  of  another  bank  arc  received  on  deposit,  and  it  turns 
Bills  of  insoi-  out  that  that  bank  is  insolvent,  the  best  view  is 
§§"g;j3,'"gg2.  that  the  loss  must  fall  on  the  bank,  whether  the 
insolvency  be  before  or  after  depositing  the  bills. 
Fraud  of  do-  Any  fraud  or  concealment  on  the  part  of  the 
positor.  depositor   will   throw    the    loss  on  him  in   any  of 

these  cases. 

(e)  Suits  by  Depositor. — Though  the  items  on  general  de- 
posit constitute  a  running  account,  yet  it  is  not  of  such  a 
nature  that  a  bill  in  equity  for  an  accounting  will 
will  noUi*"  ^  lie.  At  any  time  the  simple  striking  of  a  balance 
for  account,  ^^^.^g^j^  ^.j^^  ^^.^  columus  of  debits  and  credits  will 
show  a  sum  which  is  a  simple  debt ;  so  that  there  is  in  fact  no 
ground  on  which  an  accounting  can  be  demanded  in  equity. 
An  ordinary  action  of  debt  will  lie  on  behalf  of  the  depositor, 
and  if  the  bank  answer  payment  or  discharge,  it  is  matter  of 
common  law,  where  the  remedy  for  cither  party  is  perfect. 
Neither,  as  has  been  stated,  is  there  a  fiduciary  relation  of 
any  nature  whatsoever  between  the  parties  which  could  justify 
recourse  to  equity.  Suit  will  lie  on  the  common  money  counts. 
This  has  been  conclusively  settled  by  the  sound  decision  given 
by  the  House  of  Lords  in  the  case  of  Foley  v.  HilL^^ 

It  has  been  said  that  the  bank  is  debtor  to  the  depos- 
itor for  the  balance  of  his  deposit  account.  But  though  the 
relationship  between  the  bank  and  the  depositor  is  in  nearly 
all  respects  that  of  simple  debtor  and  creditor,  yet  the  usages 

16  Bank  of  the  United  States  v.  Bank  of  Georgia,  10  Wheat.  338. 
16  2  II.  L.  Cas.  28. 

500 


BANKING   RECORDS.  §  290 

of  the  banking  business  have  introduced  certain  special  rules. 
For  example,  the  usage  of  banks  to  make  payments  only  iu 
response  to  checks,  drafts,  or  notes  made  payable  at  the 
bank  of  the  promisor,  has  given  rise  to  the  rule  that  ordi- 
narily an  action  cannot  be  maintained  by  a  depositor  against 
a  bank  to  recover  the  amount  of  his  deposit  until  a  formal 
demand  has  been  made.  The  bringing  an  action  does  not 
amount  to  a  demand  in  such  cases. ^''     (§  322.) 

§  290.  Deposit  Tickets,  Pass-Books,  Bauk-Books,  and  their 
Effect.  —  Summary:  Mistakes  in  bank  accounts  are  common, 
l)y  charging  unreal  payments,  or  excessive  payments,  or  omit- 
ting proper  credits,  or  incorrect  figuring,  and  the  writing  up  of 
a  bank-book  or  return  of  vouchers  does  not  preclude  inquiry 
into  the  correctness  of  the  account  rendered.^ 

A  bank-book  is  prima  facie  evidence,  but  no  more,^  and  is 
open  to  explanation  by  parol  evidence,  for  it  is  not  a  contract.^ 
As  between  the  bank  and  its  depositor,  the  entry  of  debits  in 
the  pass-book  and  striking  a  balance  are  a  statement  of  account, 
and  the  delivery  of  the  book  to  the  depositor  and  its  retention 
by  him  without  objection  make  it  a  stated  account,  and  a  re- 
tention for  many  months  and  drawing  out  the  exact  balance 
shown  on  the  book  afford  clear  evidence  of  a  settled  as  well 
as  a  stated  account,  and  prima  facie  establishes  the  accuracy 
of  the  items.3 

If  the  depositor  acts  on  faith  of  the  account  in  a  man- 
ner he  would  not  have  done  but  for  faith  in  its  correctness, 
the  bank  is  bound,*  or  if  the  depositor  neglects  to  make  such 

"  Chemical  National  Rank  v.  Bailey,  12  Blatchf.  480;  Tayne  v.  Gard- 
ner, 29  N.  Y.  146. 

1  §  290.  First  National  Bank  v.  Whitman,  94  U.  S.  346;  Mechanics' 
Bank  v.  Earp,  4  Rawle,  384;  Buchlin  v.  Chaplin,  1  Lans.  443;  FoUansbee 
V.  Parker,  70  111.  11;  Bullock  v.  Boyd,  2  Edw.  Ch.  293;  Bruen  v.  Hone,  2 
Barb.  586;  Schneider  ?'.  Irving  Bank,  1  Daly,  500. 

2  Featherston  v.  Norris.  7  S.  Car.  472;  s.  c.  14  S.  Car.  624;  State  ex 
rel.  Van  Wyck  v.  Norris,  15  S.  Car.  241;  Union  Bank  r.  Knapp,  3  Pick. 
96;  Davis  v.  Lenawee  County  Savings  Bank,  53  Mich.  163. 

8  Clark  V.  National  Bank  of  City  of  New  York,  11  Daly,  239. 
♦  Skyring  v.  Greenwood,  4  Barn    &  Cr.  281;  Heaue  r-  Kogers,  9  Barn. 
&  Cr.  577;  Hume  v.  Bollan,  1  C.  &  M.  130. 

501 


§  291  GENERAL   DEPOSIT. 

examination  as  a  prudent  man  would  make  of  his  accounts, 
and  the  bank,  acting  in  good  faith  or  omitting  to  act  by  reason 
of  his  silence,  puts  itself  in  such  position  that  correction  would 
injure  it,  the  depositor  is  bound.^ 

A  pass-book  or  other  book  of  account  is  not  negotiable,  and 
Pass-book  not  canuot  be  rendered  su  by  any  agreement  of  the  par- 
negotiable,      ^jgg  tj^at  the  balance  shall  be  payable  "  to  order."  ^ 

A  deposit  ticket  may  be  controlled  by  parol.  It  is  not  a 
contract,  but  a  memorandum  or  "  note  to  hel])  the  memory."  '    ■ 

§291.  Bauk-Books,  or  Pass-Books. —  Expanded  statement: 
The  custom  is  probably  universal  in  this  country  for  every 
depositor  with  a  bank  to  have  his  bank-book,  so  called.  In 
England  the  same  thing  is  called  a  "  passage-book  "  or  "  pass- 
book." It  is  hardly  necessary  to  describe  anything  so  famil- 
iarly known.  Instead  of  this  book,  private  bankers  sometimes 
give  simple  receipts ;  or,  more  frequently,  only  render  to  their 
customers,  from  time  to  time,  balanced  accounts. 

(a)  Ordinarily,  whenever  a  deposit  is  made,  the  bank-book 
is  presented  at  the  bank  counter  for  the  purpose  of  having 
Balance  and  the  amount  and  date  of  the  deposit  contemporane- 
rr'-?'',!f'"  ^  ouslv  entered  therein  by  the  bank  clerk  or  teller, 
stated.  ^t  intervals,  also,  it  is  sent  into  the  bank  to  be 

balanced  by  the  proper  officer  ;  after  which  it  is  returned 
to  the  depositor,  customarily  accompanied  by  all  his  checks 
which  have  been  paid  by  the  bank  since  the  date  of  the  next 
preceding  balancing.  It  will  be  seen  that  the  chief  value  of 
the  book  is  that  the  depositor  may  have  a  species  of  check 
upon  the  bank,  and  may  use  it  as  evidence  upon  the  occur- 
rence of  any  dispute  and  lawsuit.  The  entries  in  the  bank- 
book, made  by  the  proper  officer,  bind  the  bank  as  admissions. 
Especially  the  balancing  of  the  book  is  conclusive  upon  the 
bank,  in  the  same  manner  as  an  account  stated. 

(K)  But  the  entry  of  credit  for  a  deposit  is  held  to  be  an 
original  entry  only  on  the  supposition  that,  as  in  the  ordinary 

6  Dana  v.  National  Bank,  132  Mass.  156;  Leather  Manufacturers' 
Bank  v.  Morgan,  117  U.  S.  96. 

«  Witte  V.  Vincenot,  43  Cal.  3'25;  Stewart  v.  State,  42  Tex.  242. 
^  Weisinger  v.  Bank,  10  Lea,  330. 
502 


PASS-BOOK.  §  291 

course  of  l)i!.sincss  above  described,  the  book  accom-  „  ,  . 

'  Tjiitries  are 

panied  the  deposit,  and  the  eiiti-y  was  made  by  tlie  ""'y  receipts 

^  '  •'_•'=  prima  fn- 

teller  simultaneously  with  the  receipt  of  the  money,  cit  evidence 
and  as  part  of  the  same  transaction.  For  if  the  '^'''"'^ 
book  was  sent  to  be  written  up  afterwards  from  the  books 
or  memoranda  in  possession  of  the  bank,  the  entries  are  not 
original,  and  may  be  examined  into.^  But  the  entry  of  the 
credit  is,  after  all,  only  a  receipt.  It  is  prima  facie  evi- 
dence against  the  bank,  and  binds  it  like  any  other  form 
of  acknowledgment  or  receipt.^  But  apparently  it  binds  no 
more ;  and  as  a  receipt  it  is  open  to  explanation  by  evidence 
aliunde.  So  that,  if  the  bank  succeeds  in  showing  clearly  that 
the  entry  is  a  mistake,  it  will  no  longer  be  binding.^  If  the 
correctness  or  incorrectness  of  the  entry  be  disputed  between 
the  customer  and  the  bank,  a  question  of  fact  is  thereby  made 
for  the  jury.* 

(f)  But  the  most  difficult  questions  arise  in  considering 
to  what  extent  the  bank-book  can  be  regarded  as  binding 
upon  the  depositor.  In  the  simple  case  of  an  er-  aiso  as 
roneous  entry  by  the  receiving  teller,  of  course  posiu.r,  arid 
the  customer  may  insist  upon  correction.  Even  t^ojig^i  ^y'" 
where,  when  making  his  deposit,  he  also  hands  v^^^o^- 
in  with  it  the  ordinary  memorandum  stating  what  sums 
he  is  depositing,  and  the  receiving  teller's  entry  corresponds 
with  this  memorandum,  he  may  afterward  be  allowed  to  show 
that  both  his  memorandum  and  the  entry  were  wrong,  and 
gave  him  credit  for  too  small  a  sum.  For  the  bank  is  in  fact 
liable  for  precisely  the  amount  of  money  it  receives.  It  is 
the  act  of  receiving  which  by  itself  creates  and  perfects  the 
debt,  and  which  alone  need  be  shown.  The  receipt  therefore 
is  open  to  correction  in  favor  of  the  depositor,  if  it  be  errone- 
ous. The  actual  fact  of  the  real  deposit  is  alone  absolutely 
conclusive. 

1  §  201.    Manhattan  Co.  v.  Lydio;,  4  Johns.  377. 

'^  Union  Bank  v.  Knapp,  3  Pick.  96;  Commercial  Bank  of  Scotland  v. 
Khind,  1  Macq.  11.  L.  Ca.s.  043;  Shaw  v.  Daituall,  0  Barn.  &  C.  57. 

*  Shaw  i;.  Pioton,  4  Barn.  &  C.  715. 

*  Snead  v.  William.s,  9  L.  T.  n.  s.  Exch.  115. 

503 


§  291  GENERA.L   DEPOSIT. 

{d}  This  rule  of  law  is  rigid,  and  can  only  be  dispensed 
with  by  the  express  agreement  of  the  parties.  It  cannot  be 
Nobv-iaw  infringed  or  modilied  by  reason  of  any  orders  or 
can  subtract    ^v-laws  of  the   bunk.^     When,  however,  the  book 

from  this  •'  '  ' 

"g''t-  has  been  balanced  by  the  bank  oflicer,  has  been  re- 

turned to  the  depositor  together  with  his  checks,  and  has  been 
retained  by  him  for  any  length  of  time  without  olgection, 
the  matter  becomes  less  clear  upon  principle,  and  the  de- 
cisions arc,  perhaps,  not  wholly  harmonious.  The  object 
which  the  bank  declares  itself  to  have  in  view  is  to  put  the 
depositor  in  the  way  promptly  to  discover  and  demand  correc- 
tion of  any  mistake  existing  in  its  account  with  him. 

(e)  Accordingly,  it   has   been   held   in  England   that  the 

silence  of  the  customer  for  a  reasonable  time  after  receiving 

back  his   books  and  checks  would  be  deemed  an 

Acquiescence  r       ^  j.  i?    j.i 

in  account       admissiou  ou    lus  part  oi   the  correctness  oi  the 
balance.*^     It  is  not  that  his  right  to  have  the  book 

amended  to  agree  with  the  fact  has  been  modified ;  but  that 

he  has  lost  that  right  altogether  by  reason  of  his  own  laches 

in  failing  to  demand  the  amendment  earlier. 

In  Union  Bank  v.  Knapp,  supra,  the  bank-book  was  said  to 

be  a  transcript  of  the  books  of  the  bank,  and  so,  if  not  ob- 
iected  to,  to  operate  as  a  mutual  acknowledgment 

Balance  con-        „     ,  .  .       .1     •  it  7>    j.  ii 

elusive  after  of  the  parties  as  to  their  money  dealings,  but  the 
SIX  years.  construction  which  this  remark  ought  to  receive 
from  the  circumstances  of  the  case,  and  the  course  of  rea- 
soning adopted  by  the  court,  both  go  to  show  that  the  judges 
did  not  mean  to  adopt  the  English  rule.  The  case  really 
arose  and  was  decided  under  the  Statute  of  Limitations. 
They  say  that  the  balance  struck  goes  into  the  new  account 
as  a  single  item,  and  as  such  is  taken  out  of  the  statute ;  but 
that  it  is  taken  out  as  a  solid  amount ;  that  the  several  items 
going  to  make  it  up  are  not  taken  out  of  the  statute  and 
cannot  be  inquired  into.  Since  the  court  thus  take  the  pains 
to  say  that  the  items  shall  not  be  looked  into  after  six  years 
from  the  date  of  the  balancing,  which  must  then  be  regarded 

6  Mechanics  &  Farmers'  Bank  r.  Smith,  19  Johns.  115. 
*•  Devaynes  v.  Noble,  1  Mer.  511. 

604 


ERROKS   IN    ACCOUNTS.  §  291 

as  conclusive,  it  must  be  inferred  that  they  do  not  mean  to 
regard  the  book  or  the  balancing  as  a  conclusive  "  mutual  ac- 
knowledgment" of  the  items  at  times  prior  to  the  lapse  of 
that  period.     In  Watson  v.  Phaniix   Bank,"  the  depositor's 
bank-book  was  said  to  be  no  better  evidence  than  the  books 
of  the  bank.     That  is  to  say,  it  is  a  mere  account  drawn  up 
by  bank  oflliccrs  and  not  reinforced  by  a  presumption  of  cor- 
rectness growiug  out  of  its  possession  by  the  depositor.     The 
best  rule,  as  it  is  the  most  just,  seems  to  be  the  one  laid  down 
in  the  New  York  cases.     In  Weisscr  v.  Denison,^  the  ruling 
was  substantially,  that,  if  the  depositor  had  not  ex-   silence  of 
amined  and  objected  to  the  account  stated  in  his   cartTtile 
book  within   a  reasonable  time  after  it  had  been   p"jJ"pJn 
balanced  and  returned  to  him  with  the  checks,  his   ^J™- 
silence  could  at  most  only  be  prima  facie  evidence  against 
him,  and  would  throw  the  burden  of  proof  upon  him,  instead 
of  leaving  it,  where  it  would  otherwise  rest,  with  the  bank, 
to  prove  its  payments. 

(/)   So  the  depositor  was  allowed  to  show  that  certain 
checks  charged  against  him  in  the  account  were  forgeries, 
though  a  considerable  time  had  elapsed  since  he   in  case  of 
received   back    his  Ijook.     Johnson,  J.  said,  that,   depS/'s^ 
in  contemitlation  of   law  the   book  was   balanced   ""J^  ^^id  to 

1  oruinary 

and  the    checks  returned  to  him   for   his    protec-  care  and  diii- 

ffcncG  in 

tion,  not  for  that  of  the  bank.  This  law  certainly  making  ex- 
bears  hardly  upon  the  bank,  which,  in  performing  §§'46i,'T76- 
the  task  of  writing  up  the  book  and  in  return-  '*''^- 
ins:  the  checks,  which  are  its  own  sole  vouchers  for  the 
payments  made  by  it  on  the  depositor's  account,  has  its  own 
protection  from  precisely  these  tardy  disputes  partially  in 
view,  as  it  may  reasonably  expect  that  any  ordinarily  careful 
man  will  not  long  delay  to  see  that  the  balance  is  correct, 
and  that  the  checks  returned  and  purporting  to  be  his  are  in 
fact  genuine.  The  language  used  by  one  of  the  judges  inti- 
mates that  if  in  the  interval  the  bank  had  suffered  any  injury, 
which  it  might  have  escaped  or  avoided  had  it  received  cor- 
rection in  due  season  from  its  depositor,  then  the  rights  of 
T  8  Met.  217.  *  10  N.  Y.  G8. 

505 


§  291  GENERAL   DEPOSIT. 

the  parties  might  be  affected  by  this  fact  also.  This  last- 
named  case  has  been  cited  with  ap})roval,  and  followed,  in 
Illinois.  A  depositor's  clerk  drew  checks,  wrongfully  signing 
the  depositor's  name,  which  were  all  duly  honored  by  the 
bank.  The  process  was  continued  several  months,  during 
which  time  the  bank-book  was  several  times  written  up,  re- 
turned to  the  depositor,  and  by  him  sent  back  to  the  bank  to 
be  again  written  up,  as  in  the  ordinary  course  of  business. 
He  meantime  did  not  detect  the  fraud  for  about  six  months, 
apparently  because  he  intrusted  the  comparing  of  the  bank- 
book to  this  same  clerk.  The  court  said  that  these  facts  did 
not  conclude  him  as  against  the  bank ;  that  the  writing  up 
the  pass-book  and  returning  tlie  checks  were  for  the  protec- 
tion of  the  depositor,  not  of  the  bank ;  and  the  depositor's 
failure  to  examine  them  was  not  such  negligence  as  to  exon- 
erate the  bank  from  liability  to  make  good  to  him  the  amount 
of  checks  improperly  paid  and  cliarged  to  him.'-^ 

In  Manhattan  Co.  v.  Lydig  ^^  it  was  said  that,  though  the 
depositor  should  not  be  allowed  to  open  the  whole  account, 
yet  after  the  lapse  of  only  a  moderate  time  without  objection 
by  him  he  might  still  be  allowed  to  falsify  certain  particular 
items.  Whether  this  right  ought  to  be  allowed  to  exist  for 
so  long  a  time  as  the  six  years  of  the  Statute  of  Limitations 
may  well  be  questioned.  Probably  such  time  as  the  courts 
should  consider  reasonable,  upon  consideration  of  the  nature, 
course,  and  amount  of  the  dealings  between  the  parties,  would 
be  held  conclusive  against  the  depositor.  For  after  he  has 
passed  many  successive  balancings,  for  many  months  or  years, 
having  meantime  had  multitudinous  transactions  with  the 
bank,  it  might  fairly  be  deemed  an  unreasonable  hardship  if 
he  could  still  be  allowed  to  go  back  and  litigate  to  correct  an 
error  which  he  has  so  long  had  the  means  of  correcting,  and 
which  the  bank  might  justly  presume  that  any  ordinarily 
careful  person  could  not  fail  to  have  corrected  long  since. 

Tlie  weight  of  reason  and  authority  is  now  strongly  in  favor 
of  the  rule  that  the  depositor  must  answer  to  the  bank,  under 

"  Manufacturers'  National  Bank  v.  Barnes,  65  111.  69. 
10  4  Johns.  377. 
506 


BANK    BOOKS   AS   EVIDENCE.  §  294 

the  general  principles  of  estoppel  and  responsibility  for  loss 
caused  by  negligence,  for  any  damage  resulting  to  the  bank 
by  reason  of  its  having  aeled  or  omitted  to  act  upon  faith  of 
the  dejjositor's  silence,  when  he  might  have  discovered  the 
fraud,  forgery,  or  mistake  by  reasonable  care  in  examining 
his  accounts  with  the  bank.     (§§  470-473.) 

§  292.  Silence  may  estop  the  Depositor  as  to  Charges  and 
Commissions  of  the  Bank.  —  A  different  description  of  case  is 
where  there  is  no  claim  to  correct  a  mistake  in  the  bank- 
book, but  use  is  sought  to  be  made  of  it  in  order  to  conclude 
the  depositor  as  to  a  course  of  dealing,  or  an  implied  agree- 
ment between  himself  and  the  bank.  The  extent  to  which 
the  book  may  be  used  for  this  purpose  is  illustrated  by  the 
following  case.  A  dc])Ositor  had  largely  overdrawn  his  ac- 
count, and  the  banker  in  writing  up  the  bank-book  at  the  end 
of  a  period  of  six  months  had  made  certain  charges  in  the 
way  of  interest  and  commissions  for  his  advances,  and  had 
explained  the  same  to  the  agent  of  the  depositor  (the  deposi- 
tor himself  being  too  ill  to  attend  to  his  affairs).  It  was  held 
that  the  lapse  of  several  months,  without  complaint  made  on 
behalf  of  the  depositor,  was  conclusive  evidence  of  his  acqui- 
escence in  the  charges  made.  But  it  was  also  held  that  it 
was  no  evidence  of  his  acquiescence,  or  agreement  to  acqui- 
esce, in  similar  charges  continued  thereafterward  during  an 
ensuing  period  of  six  months.^ 

§  293.  Bank-book  not  conclusive  as  to  Title  to  the  Deposit. — 
It  has  been  held  in  England,  that  the  name  in  the  bank-book 
is  not  conclusive  as  to  the  ])erson  with  whom  the  bank  con- 
tracted. If  money  be  deposited  by  A.  in  his  own  name,  B. 
may  recover  from  the  bank  by  showing  that  the  deposit  was  in 
fact  made  upon  his  account,  —  that  he  was  the  principal  and 
the  real  lender,  creditor,  or  depositor.  But  the  evidence  to 
this  effect  must  be  very  clear  and  explicit. ^     See  §  oG"). 

§  294.  Right  to  inspect  Books  and  inquire  into  Account.  — 
It  has  been  said  that  "oh  all  proper  occasions''^  a  depositor- 

^  §292.  Williamson  V.  Williamson,  L.  R.  7  Eq.  542;  and  see  Mosse 
V.  Salt.  32  Beav.  209. 

1  §  293.    Sims  v.  Bond,  5  Barn.  &  Ad.  389. 

507 


§  294  GENERAL    DEPOSIT. 

has  a  right  to  inspect  the  books  of  the  bank,  and  that  for  this 
purpose  the  officers  having  charge  of  the  books  ^  are  agents 
of  both  parties.  What  would  be  regarded  as  "  proper  occa- 
sions "  was  not  intimated  ;  and  certainly  such  a  request,  made 
without  notice  by  the  depositor  or  invitation  by  tlie  bank, 
would  not  improperly  be  regarded  by  the  bank  officers  as  an 
unwarrantable  intermeddling.  The  depositor  not  being  in  any 
Depositor's  rcspcct  responsible  for  the  conduct  of  the  affairs  of 
t'r'hi'/own"^'^  the  bank,  not  being  a  stockholder  therein,  or  not 
accounts.  applying  to  examine  in  tliat  character,  might  rea- 
sonably be  refused  an  inspection  of  all  its  private  affairs.  It 
must  be  supposed  that  the  right  to  examine,  if  fully  consid- 
ered and  passed  upon,  would  be  confined  to  such  portions  of 
the  books  as  relate  to  the  accounts  and  dealings  of  the  bank 
with  the  individual  applicant ;  also  that  the  "  pro])er  occa- 
sions "  would  be  very  narrowly  defined.  If  the  depositor  has 
reason  to  think  that  there  is  an  error  in  his  account,  as  shown 
on  the  bank-book,  he  may  reasonably  demand  an  inspection 
at  the  first  convenient  hour;  but  the  reason  of  the  privilege, 
and  doubtless  the  privilege  accordingly,  should  be  confined  to 
such  an  examination  only  as  would  suffice  to  prove  or  refute 
the  suspicion  of  error,  and  could  not  extend  to  the  accounts 
of  other  customers  or  to  the  general  business  of  the  institu- 
tion. It  might  be  highly  injurious  to  the  welfare  of  the  cor- 
poration and  to  the  interests  of  all  concerned  to  have  its 
condition  and  affairs  subject  to  inspection,  and  therefore  to 
publication  and  gossip.  Indeed,  the  bank  might  be  commit- 
ting a  positive  wrong,  for  which  it  might  be  held  to  answer 
in  damages,  if  it  should  allow  one  person  to  examine  the 
accounts  of  others. 

(a)  When  Bank  may  reveal  the  State  of  a  Customer's  Ac- 
count to  Another.  —  It  has  been  laid  down  that  a  banker 
has  no  right  to  reveal  the  state  of  his  account  with  his  cus- 
tomer.2  Though  in  the  case  cited  it  has  also  been  doubted 
whether  an  action  for  damages  can  be  maintained  by  the 

'  §  294.  Union  Bank  v.  Knapp,  3  Pick.  96;  Watson  v.  Phoenix  Bank, 
8  Met.  217. 

2  Hardy  v.  Veasey,  3.  L.  R.  Ex.  107. 
508 


INRPRCTION    OF    BANK-HOOKS.  §  294 

customer  against  the  banker  iiuks.s  sjiecific  injury  can  be 
shown.  But  this  case  is  a  very  unsatisfactory  precedent, 
since  in  it  the  question  whether  or  not  the  relation  between 
banker  and  customer  created  this  duty  of  secrecy  on  the  part 
of  the  former  concerning  the  balance  of  the  latter  appears, 
for  some  unaccountable  cause,  to  have  been  left  to  the  de- 
cision of  the  jury.  They  found  that  the  relationship  did 
create  such  a  duty,  and  the  court  allowed  their  finding  to 
remain  undisturbed.  In  another  English  case  it  has  been 
held  that,  where  a  check  is  presented,  and  the  banker  lias 
funds  of  the  drawer,  but  not  sufficient  to  meet  this  cheek, 
the  banker  has  no  right  to  disclose  to  the  holder  of  tho 
check  the  amount  of  such  deficiency,  and  so  to  enable  the 
holder  to  pay  in  the  balance  to  the  drawer's  credit  and  then 
procure  the  check  to  be  paid.^ 

It   may   be   very    proper   to   deny   the  general  right  of  a 
banker   to   disclose   the   state   of   an    account   to  satisfy  an 
inquiry,  to  the  possible  great  disadvantage  of  his 
customer    (as,  if   the   latter    Avere    thought    to    be   er's  ri,;^ht of 
embarrassed  and  his  account  overdrawn,  his  credit     ^  "'"' 
might  be  damaged  by  the  appearance  of  his  account,  though 
a  fuller  statement  of  his  arrangements  with  the  bank  would 
wear  a  different  aspect). 

It  is  no  part  of  the  business  of  a  bank  to  constitute  itself 
a  l)ureau  of  information,  or  head-quarters  for  reporters  and 
gossips.  But  the  case  of  a  check-holder  when  the  funds  are 
insufficient  seems  very  different ;  he  has  a  right  to  whatever 
unincumbered  funds  of  the  drawer  are  in  the  hands  of  the 
bank,  a  right  superior  to  any  right  of  the  depositor,  and 
if  the  disclosure  in  such  case  be  a  harm  to  the  depositor  it 
is  his  own  fault  alone,  for  he  drew  the  check  and  author- 
ized the  inquiry.  One  to  whom  the  depositor  has  passed 
his  interest  in  the  deposit  should  have  the  same  right  to 
know  its  condition  as  the  depositor  possessed.  As  to  the 
depositor,  there  can  be  no  doubt  that  tho  bank  should  state 
the  amount  on  hand,  and  give  the  holder  an  opjiortunity 
to  decide  what  course  he  will  pursue ;  and  though  the  strict 
«  Foster  v.  Bank  of  London,  3  F.  &  F.  214. 

509 


§  205  GENERAL   DEPOSIT. 

contract  of  the  bank  with  the  depositor  may  perhaps  be  only 
to  pay  if  it  has  sufficient  funds,  it  is  a  public  institution, 
receiving  valuable  franchises  from  the  State,  and  owes  in  re- 
turn a  duty  to  the  public  to  conduct  its  business  in  such  a 
manner  as  not  to  cause  damage  to  those  who  have  dealings 
with  it,  by  refusal  to  do  so  simple  and  costless  an  act  as 
to  state  the  true  condition  of  the  deposit  against  which  a 
check  is  drawn.  Indeed,  it  seems  clear  to  us  that  the  duty 
of  the  bank  can  be  placed  on  firmer  ground.  It  would  have 
no  right  to  say  to  a  depositor  inquiring  as  to  his  account, 
with  a  check  in  his  hand,  '•  We  agreed  to  pay  your  checks  if 
the  funds  were  sufficient;  but  your  check  is  too  large,  and 
we  will  have  nothing  to  do  with  it,  nor  inform  you  of  the  true 
amount."  Well,  then  when  the  depositor  gives  II.  the  check 
for  value,  he  (substantially  and  according  to  the  best  opinion 
legally)  transfers  the  whole  deposit  (if  less  than  the  check) 
to  the  holder  (subject  to  his  acceptance),  and  therefore  the 
holder  has  the  same  right  of  inquiry  of  the  liank  and  as 
against  the  bank  as  the  depositor. 

It  is  unquestionable  that  a  banker  summoned  as  a  witness 
—  a  fortiori  summoned  as  garnishee  —  must  declare  the  bal- 
ance of  his  customer  at  any  given  date.  The  fact  or  knowledge 
cannot  be  regarded  as  a  "  confidential  communication."  * 

And  if  a  general  creditor  has  a  right  to  know  the  state 
of  the  account  in  this  way,  when  he  inquires  in  the  manner 
provided  by  law  for  making  his  demand  upon  the  deposit,  why 
has  not  such  a  special  creditor  as  a  check-holder  an  equal 
right,  when  he  makes  his  demand  in  the  way  provided  by 
law  for  his  kind  of  demand  on  the  deposit,  namely,  present- 
ment of  his  check  ? 

Note  upon  the  Use  of  Bank-Books  as  Evidence. 

§  295.  The  books  of  the  bank  are  admissible  in  evidence  on  its  behalf.^ 
The  reason,  as  laid  down  in  a  well-known  Massachusetts  case,  is  that 

<  Loyd  V.  Freshfield,  2  Car.  &  P.  325;  and  see  Forbes's  Case,  41  L.  J. 
Ch.  467. 

1  §295.  Bagley  u.  Robertson,  57  Ga.  145;  Union  Bank  v.  Knapp,  3 
Pick.  96;  Watson  v.  Phoenix  Bank,  8  Met.  217  (following  and  relying 
upon  the  preceding). 

510 


BANK-BOOKS    AS    EVIDENCE.  §  295 

depositors  have  a  right  "  on  all  proper  occasions  ""  to  inspect  the  books  of 
the  bank,  and  therefore  the  olFicers  having  charge  o£  these  books  are  the 
agents  of  both  parties  in  this  portion  of  their  employment.  Also,  because 
the  depositor's  own  bank-book  is  a  transcript  of  the  books  of  the  bank, 
and  in  effect  operates  as  a  mutual  acknowledgment  between  the  parties 
as  to  their  money  dealings. i  This  line  of  reasoning  will  hardly  commend 
itself  as  perfectly  satisfactory.  Practically  speaking,  the  right  of  the  de- 
positor to  examine  the  books  of  the  bank  must  be  exceedingly  limited, 
and  the  "proper  occasions"  could  hardly  be  supposed  to  occur  often 
enough  to  make  the  book-keepers  really,  and  in  any  reasonable  sense  of 
the  phrase,  the  agents  of  the  depositor.  They  are  in  no  manner  under 
his  supervision,  nor  would  it  be  possible  for  him  daily  to  examine  their 
entries,  even  if  the  courts  should  hereafter  feel  able  to  assert  the  occa- 
sional right  of  examination  above  declared  to  exist,  when  that  question 
shall  be  directly  raised.  Other  authorities,  though  content  to  admit  the 
books  in  evidence,  yet  lay  down  a  doctrine  contrary  to  that  advanced  in 
the  Massachusetts  opinion,  and  say  that  the  depositor  is  7}nt  bound  by  the 
books  of  the  bank,  since  the  persons  who  keep  those  books  are  in  no  sense 
his  agents,  but  are  the  employees  of  the  bank  only.  'It  is  true  that  the 
Massachusetts  judges  did  not  declare,  and  did  not  intend  to  declare,  that 
the  depositor  would  be  absolutely  concluded  by  the  books  of  the  bank; 
yet  their  reasoning  was  only  a  proper  basis  for  this  conclusion.  The  dis- 
cussion of  the  comparative  merits  of  the  different  courses  is,  however, 
rendered  rather  unprofitable  by  the  fact  that  they  lead  to  the  same  ulti- 
mate conclusion,  and  that  this  is  too  unquestionably  sound  to  suffer  from 
any  criticism  of  the  reasoning  which  has  led  up  to  it.  Either  directly  or 
by  implication,  too  many  authorities  combine  to  assert  the  admissibility 
of  the  books  of  the  bank  to  leave  the  rule  in  any  doubt.- 

The  entries  in  the  books,  when  produced,  must  be  verified  and  sworn 
to  by  the  clerk  who  made  them  if  possible.  But  if  he  is  inaccessible, 
proof  that  the  entries  are  in  his  handwriting  will  suffice. ^ 

(a)  So,  too,  the  cashier  of  the  bank  is  competent  to  prove  the  amount  of 
a  deposit  in  favor  of  the  bank;  certainly,  if  the  bank  i-eleases    Proof  of 
him  from  any  possible  liability  he  may  be  under  to  it  for  any   entries, 
mistake  or  misconduct  of  his  own  in  the  matter  ;  and  perhaps  so,  even  if 
the  bank  does  not  thus  release  him.* 

But  if  the  entry  was  actually  made  by  a  clerk,  it  is  said  that  the  clerk 

2  Johnson  r.  Farmers'  Bank,  1  Harr.  117;  Meighen  v.  Bank,  25  Pa. 
St.  288  (by  iuiplication;  the  books  were  introduced  and  the  theory  on 
which  they  were  kept  was  allowed  to  be  explained  in  that  case) ;  Town 
of  Concord  i'.  Concord  Bank,  16  N.  H.  26. 

8  Union  Bank  v.  Knapp,  3  Tick.  96;  Watson  v.  Phoenix  Bank,  8  Met. 
217;  Johnson  v.  Farmers'  Bank,  1  Harr.  117. 

^  Johnson  v.  Farmers'  Bank,  1  Harr.  117. 

511 


§  295  GENERAL    DEPOSIT. 

should  be  siininioned  in  person;  for  thougli  it  is  true  tliat  the  cashier  has, 
as  a  part  of  liis  official  function,  the  charge  of  the  books  and  the  superin- 
tendence of  the  book-keeping,  yet  this  does  not  necessarily  imply  that 
personal  knowledge  of  particular  entries  which  is  necessai-y  in  order  that 
they  sliould  be  duly  proved.^  It  is  the  actual  maker  of  the  daily  entries 
who  is  needed.  An  examined  copy  of  the  books  is,  by  itself,  inadmis- 
sible. But  it  has  been  said  that  perhajis,  if  supplemented  by  proof  that 
the  original  entries  were  made  by  an  officer  of  the  bank,  the  officer  him- 
self swearing  to  this  fact;  or  if  this  be  impossible,  his  handwriting  being 
proved,  the  copy  might  in  a  case  of  sufficient  necessity  be  admitted.^ 

(b)  The  case  of  Watson  v.  Phoenix  Bank,  adopting  the  views  above 
Depositor's  criticised,  which  were  laid  down  in  the  preceding  case  of  Union 
book.  Bank  v.  Knapp,  says  that  the  depositor's  bank-book  is  no  bet- 

ter evidence  than  the  books  of  the  bank.  Certainly,  if  the  doctrine  of 
the  last-named  case  is  correct,  this  is  an  unavoidable  corollary.  It  has 
been  stated  that  the  depositor  is  under  no  such  positive  obligation  to  ex- 
amine his  bank-book,  when  returned  to  him  after  its  posting  by  the  bank, 
and  to  correct  errors,  that  his  failure  promptly  to  demand  a  correction 
can  be  subsequentry  construed  as  an  admission  of  correctness.  Neverthe- 
less, the  fact  that  he  has  the  opportunity  offered  him  to  do  this,  and 
that  any  man  of  ordinary  prudence  in  the  conduct  of  his  affairs  would 
do  it,  must  raise  a  certain  presumption  of  the  accuracy  of  the  entries  in 
the  bank-book  stronger  than  any  presumption  which  can  reasonably  arise 
in  favor  of  the  entries  in  the  books  of  the  bank ;  for  these,  whatever  may 
be  the  legal  right  of  the  depositor  to  examine  them,  he  in  point  of  fact 
never  does  see. 

(c)  Neither  is  it  correct  to  say  that  the  value  of  these  two  descrip- 
tions of  entries  is  equal,  on  the  theory  advanced  by  the  judge  in  Union 
Bank  v.  Knapp,  that  the  bank-book  is  a  "transcript"  of  the  books  of 
the  bank;  for  this  is  not  the  truth.  The  noting  of  the  checks  drawn 
—  that  is,  the  depositor's  debit  account  —  is  probably  made,  when  the 
bank-book  is  posted,  from  the  books  of  the  bank;  but  the  entries  of  de- 
posits, which  form  the  at  least  equally  important  credit  side  of  his  account, 
are  made  in  most  cases  by  the  receiving  teller  when  the  bank-book  and 
the  deposit  are  offered  to  him  together,  and  the  book  is  at  once 
biiity  of  niis-  returned.  No  contemporaneous  entry  is  made  on  tlie  books 
^nk's* hooks  ^^  ^^^^  bank,  and  the  credit  does  not  appear  upon  them  until 
than  in  the      a,t  a  later  hour  of  the  day  it  is  copied  on  to  them  from  the 

pass-book.  .  ... 

depositor's  memorandum  of  his  deposit,  which  he  hands  to 
the  receiving  teller,  and  which  is  checked  as  correct  by  that  officer,  and 
retained  by  him  for  the  very  purpose  of  subsequently  making  up  or  en- 

^  Williams  v.  Kelsey.  6  Ga.  365. 

6  Piiiladelphia  Bank  v.  Executors  of  Thos.  Officer,  12  Serg.  &  R.  40; 
Ridgway  v.  Farmers'  Bank,  id.  256. 

512 


BANK-BOOKS   AS   EVIDENCE.  §  295 

abling  the  book-keeper  to  make  up  the  entries  in  the  books  of  the  batik. 
There  are,  therefore,  obviously  much  greater  means  for  a  mistake  to  creep 
into  the  books  of  the  bank  without  observation,  than  for  the  same  mis- 
take to  appear  in  the  bank-book  of  the  depositor  without  his  observing 
it.  Hence  it  follows  that,  if  the  bank-book  of  tlie  depositor  does  operate 
as  an  acknowledgment  between  the  parties  (Union  Bank  v.  Knapp),  it  is 
certainly  entitled  to  greater  consideration  than  tiie  books  of  tlie  bank, 
which  could  have  the  same  operation  only  by  virtue  of-a  very  questionable 
legal  fiction. 

((/)  In  New  York  it  has  been  held  tliat  if  the  bank-book  accompanies 
the  deposit,  and  tlie  credit  is  given  in  the  book  at  the  very   jjew  York 
time  when  the  deposit   is    made,  it  then  becomes  an  ori"i-    ''^"^  ^'^^■'^, 

^  _  _       '^        pass-book 

nal  entry,  and  is  conclusive  upon  the  bank;  though  if  the  conclusive 
book  were  sent  to  be  written  up  afterwards  this  would  not  be  usually  only 
the  case.''  In  Maine,  it  has  been  declared  generally,  that  any  pi'^nafacte. 
credit  in  a  bank-book  may  at  any  time  be  corrected  by  parol  evidence, 
like  any  other  receipt.^  Clearly  the  credit  entries  in  the  bank-book 
are  simply  receipts,  neither  more  nor  less.  There  seems  to  be  no 
reason  why  they  should  not  be  open  to  correction,  equally  with  much 
more  formal  species  of  receipts,  even  though  the  deposit  and  the  entry 
be  contemporaneous. 

The  sound  rule  would  seem  to  be  that  the  depositor's  bank-book,  if  it 
has  been  returned  to  him,  and  he  has  not  within  a  I'easonable  time  ob- 
jected to  it,  should  be  regarded  as  prima  facie  evidence  of  tlie  way  the 
account  stood  between  him  and  the  bank  at  the  date  of  the  last  balancing. 
It  settles  the  presumption  in  the  case,  and  leaves  the  onus  on  the  party 
disputing  it.  If  it  agrees  with  the  books  of  the  bank,  well  and  good ; 
then  there  can  be  no  use  of  discussing  which  of  them  is  the  better  evi- 
dence, since  both  support  the  same  state  of  facts.  But  if  it  is  at  variance 
with  the  books  (unless  an  error  in  copying  into  it  the  entries  of  drafts 
drawn  can  be  shown),  the  probabilities  are  that  it  is  the  more  correct, 
especially  if  the  credits  have  always  been  made  at  the  time  the  deposits 
were  paid  in.  These  were  contemporaneous  entries,  whereas  the  entries 
in  the  books  were  copies.  The  entries  of  debits  or  of  checks  drawn  are 
copies  from  the  books,  and  a  mere  error  in  copying  ought  to  be  easily 
shown  and  explained.  Further,  both  parties  have  had  access  to  the  bank- 
book. The  bank  itself  has  made  it  up,  and  the  depositor,  unless  he  is  an 
exceptionally  careless  man,  has  examined  it,  at  least  with  sufficient  care 
to  see  that  the  balance  is  correct.  Every  presumption  arising  from  the 
actual  course  of  dealing  of  the  parties  favors  the  correctness  of  the  bank- 
book to  the  extent  above  asserted,  that  is,  in  respect  to  the  last  balan- 
cing, when  the  depositor  has  since  that  time  had  it  in  his  hands  long 

■'  Manhattan  Co.  v.  Lydig,  4  Johns.  377. 
*  Lewis  V.  Eastern  Bank,  o2  Me.  90. 
VOL.  I.  33  513 


§  295  GENERAL    DEPOSIT. 

enough  to  make  it  natural  to  suppose  that  he  has  examined  it.  No 
equally  strong  presumptions  arise  in  favor  of  tlie  books  of  the  bank. 
This  is,  however,  strictly  a  mere  presumption  that  is  claimed  in  favor  of 
the  bank-book,  which  may  of  course  be  at  any  time  refuted.  The  bank 
may  show  an  error  in  the  credits,  which  are  its  receipts,  or  an  error  or 
omission  in  the  debits,  which  only  purport  to  be  a  copy  from  its  books, 
and  are  not  an  original  instrument.  The  depositor  is  under  no  positive 
legal  obligation  to  examine  the  book  or  to  object  to  its  accuracy  within 
any  specific  time.  Therefore  it  is  always  open  to  him  alter  any  lapse  of 
time  to  object  to  it,  precisely  as  it  is  open  to  any  person  to  object  to  the 
accuracy  of  an  account  rendered  to  him  by  one  with  whom  he  has  financial 
dealings. 

(e)  An  entry  in  a  bank-book  was  as  follows:  "  1861,  Dec.  OOth,  cash 
fcoin)  83000."     The  bank  had  at  the  time  ceased  to  pay  in 

Entries  com-     v  /    "  ,       ,      /       ,  • 

petent  evi-  specie,  and  when  the  depositor  subsequently  drew  checks  for  this 
nature  of  a  amount,  payable  in  gold  coin,  the  bank  refused  to  pay  in  coin, 
deposit.  j^j^  J  offered  the  ' '  legal  tender  notes  "  of  the  United  States  gov- 

ernment. The  court  held  that  this  single  entry  was  competent  evidence  for 
the  plaintiff  (in  a  suit  to  recover  the  gold  coin  or  its  equivalent  in  "  legal 
tender  notes  ")  for  the  purpose  of  verifying  the  testimony  of  a  witne.ss  con- 
cerning the  circumstances  of  the  deposit,  and  of  showing  the  nature  of  the 
particular  entry  made  by  the  bank  officer  at  the  time  as  indicative  of  the 
cliaracter  of  the  deposit  in  question;  also,  that  plaintiffs  were  not  bound 
to  put  in  evidence  all  the  other  entries  in  the  book,  but  that  it  was  suffi- 
cient if  the  book  was  placed  in  the  power  of  the  defendant  to  be  used 
as  evidence  for  any  legitimate  purpose ;  also  that  plaintiff  might  explain 
any  ambiguity  in  the  entry  itself  by  evidence  that  by  general  and  well 
known  usage  of  the  banks  of  that  city  an  entry  of  this  kind  imported  an 
agreement  to  return  the  deposit  in  kind,  but  that  such  usage  could  not 
be  proved  by  showing  a  few  particular  instances.^ 

Parol  evidence  is  admissible  to  explain  an  abbreviated  or  short  entry 
in  a  bank-book,  as  being  in  the  nature  of  a  cipher  or  technical  term.!*^ 

(/)  Tliat  a  matter  is  of  such  a  nature  that  it  ought  to  appear,  or  might 

naturally  be  expected  to  appear,  upon  the  records  or  the  books 

record  does      of  the  bank,  is  no  objection  to  a  substantiation  of  it  by  parol 

ParoTma^be  testimony.     This  rule  is  not  affected  by  the  fact  that  the  bank 

used,  even       offers  its  books  and  records,  in  which  no  such  matter  appears. 

though  Stat-      „,  .  iiii-j^.  -LI  1 

ute  requires  For  there  IS  no  necessary  legal  obligation  upon  a  bank,  unless 
a  recor  .  ^^  virtue  of  express  imperative  legislation,  to  keep  any  record, 
or  a  thorough  record,  even  of  the  formal  votes  of  the  board  of  directors. 
And  though  express  legislation  should  in  any  case  require  such  a  record 
to  be  kept,  yet  the  requisition  would  probably  be  only  directory  in  its 

9  Chesapeake  Bank  v.  Swain,  29  Md.  483. 
"  Wingate  v.  Mechanics'  Bank,  10  Barr,  104. 
514 


BANK-BOOKS    AS    EVIDENCE.  §  295 

nature,  and  if  neglected  the  vote  would  still  remain  equally  valid,  though 
unrecorded.  So  also  authority,  sanction,  and  ratification,  though  prop- 
erly the  subject  of  recoi'ded  corporate  action,  may  all  be  based  upon  con- 
clusive presumptions  of  law  growing  out  of  acts  and  dealings  and  other 
matters  wholly  independent  of  any  proceedings  appearing  of  record  or 
capable  of  so  appearing.  If  the  party  to  the  suit  seeks  to  show  facts  and 
circumstances  which  either  prove  a  vote  or  other  corporate  action  to  have 
been  had,  or  which  by  legal  implication  raise  in  his  favor  a  presumption 
of  such  vote  or  action,  the  effect  of  which  presumption  the  law  will  not 
allow  the  corporation  to  evade  by  showing  that  no  such  vote  or  action 
was  taken,  he  may  do  so  by  any  means  in  his  power.  He  cannot  be  shut 
off  from  his  rights  because  the  means  of  proving  them  are  not  furnished, 
as  they  ought  to  be,  by  the  corporate  records.  Hence  it  is  a  sound  rule 
that  the  absence  from  corporate  records  of  notice  of  a  fact,  which  if  it 
existed  ought  to  be  stated  there,  is  not  conclusive  of  the  non-existence 
of  that  fact,  and  does  not  preclude  positive  parol  testimony  offered  to 
establish  it.^^ 

^1  Concord  v.  Concord  Bank,  16  N.  II.  26;  Edgerley  v.  Emerson,  3 
Fost.  555. 

515 


CHAPTER  XIX. 

CERTIFICATES   OF   DEPOSIT. 

§  290.  Analysis. 
§  297.   Form.     §  51. 

May  vary  from  a  simple  receipt  to  a  full  express  promise  to  pay, 
with  words  of  negotiability. 
§  299.    Signature.     §  744. 

Of  the  cashier  is  suflBcient,  though  a  statute  requires  the  bank's  con- 
§  297.  tracts  to  be  otherwise  signed. 

Nature  and  Ei^fect. 

A  certificate  of  deposit  bears  a  close  resemblance  to  a  promissory 
note  on  demand,  and  is  by  some  courts  held  identical  with  such 
a  note,  so  that  suit  may  be  brouglit  upon  it  without  demand,  and 
§  298.  the  Statute  of  Limitations  runs  from  date  or  delivery,  whichever 

is  latest.     But  the  weight  of  reason  and  authority  is  to  the  effect 
tliat  it  is  intended  as  a  continuing  security,  and  that  the  bank  is 
not  in  default  imtil  demand  is  made,  so  that  demand  is  necessary 
before  a  right  of  action  can  arise  to  set  the  statute  running. 
§  298.  If  there  are  no  words  of  promise  in  the  instrument,  they  are  im- 

plied, though  a  New  York  case  holds  that  such  a  certificate  is  a 
simple  receipt  and  not  even  a  contract,  but  subject  to  control  by 
evidence  parol. 
Negotiability.     §  9,  n.  9,  §  374. 
§  299.  A  certificate  is  negotiable  if  it  contains  negotiable  words,  and  is 

payable  in  money. 
"Currency"  and  "current  funds"  are  considered  to  mean  money, 
though  there  are  cases  to  the  contrary. 
§  300.   Transfer  of  Certificate. 
By  indorsement. 
"Without  indorsement. 
Statute  op  Limitations.     §  321. 
§  301.  Analysis. 

§  302.   Staleness. 

Thirty-one  days  does  not  make  a  certificate  stale. 
Six  years  has  been  held  to  do  so. 
§  303.  Seven  years  has  been  held  not  to  do  so. 

Payment  by    (§§  400,  637). 
§  304.  A  certificate  of  deposit  is,  like  a  check,  presumed  to  be  only  con- 

ditional payment. 
§  305.  But  a  collecting  bank  may  take  its  own  certificates  in  payment,  to 

the  absolute  discharge  of  the  debtor,  though  the  bank  becomes  in- 

516 


ANALYSIS.  §  297 

solvent  before  remitting  to  tlie  creditor;  tlie  transaction  is  equiva- 
lent to  payment  of  the  certificate  and  repayment  of  the  money  to 
tlic  bank.  But  if  the  taking  is  a  fraud,  by  reason  of  the  condition 
of  tlie  bank  at  the  time  of  receiving  the  certificate  as  payment, 

§  305.  the  depositor  will  be  preferred  to  the  general  creditors  of  the 

bank,  he  having  ordered  the  bank  to  collect  and  remit. 

§  30G.   Lost  Certificate.     §§  395  A,  G49. 

§  307.     IXTEKEST    ON    CERTIFICATE.       §  309. 

§  308.   Alternate  Certificate. 

Wiiere  the  deposit  is  payable  to  the  order  of  S.  or  of  E.,  his  wife, 
if  S.  dies,  E.'s  power  is  revoked.  This  interpretation  has  been 
questioned. 

§297.  Form.  —  A  certificate  of  deposit,  or  the  written 
acknowledg-mcnt  of  the  bank  that  it  lias  received  from  a 
certain  person  a  certain  sum  on  deposit,  is  an  instrument 
occasionally  issued.  Chiefly  it  is  given  to  persons  not  regu- 
lar customers  of  the  bank  and  not  designing  to  become  such, 
but  who  have  for  some  reason,  and  on  some  isolated  occasion, 
desired  to  leave  a  sum  of  money  in  the  custody  of  the  bank. 
Sometimes,  though  more  rarely,  a  regular  customer,  having 
some  special  object  to  subserve,  may  desire  such  a  certificate. 
In  form  they  are  substantially  simple  receipts  of  the  bank,  in 
negotiable  form,  for  so  many  dollars,  and  so  are  only  evidence 
of  an  indebtedness,  like  the  bank-book. 

An  instrument  saying,  "  Due  A.  A.,  trustee,  84,000,  return- 
able on  demand.  It  is  understood  that  this  sum  is  specially 
deposited  with  us  and  is  distinct  from  the  other  transactions 
with  said  A.  A.,"  —  was  held  a  certificate  of  deposit.^ 

So,  "  Received  from  L.  $1600  on  deposit,  in  national  cur- 
rency," was  held  a  certificate  of  deposit.^ 

Ordinarily,  the  signature  of  the  cashier  to  the  certificate  is 
sufficient.  Though  it  is  a  contract  in  strict  law,  and  though 
statutes  often  designate  the  manner  in  which  "  con- 

Signature. 

tracts  "  shall  be  signed,  yet  the  phrase  thus  used  in 
the  statutes  has,  by  sheer  force  of  necessity  and  common 
sense,  been  construed  by  the  courts  not  to  apply  to  those  in- 
struments which  by  the  daily  course  of  business  in  all  bank- 
ing institutions  the  cashier  alone  is  wont  to  execute,  and 

1  §  297.   Smiley  v.  Fry,  100  N.  Y.  262. 
-  Long  V.  Straus,  107  Ind.  9i. 

517 


§  298  CERTIFICATES   OF   DEPOSIT, 

amoncc  "vvhich  the  simple  receipt  and  promise  to  repay,  which 
constitute  a  certificate  of  deposit,  arc  to  be  included.'^ 

§  298.  Nature  and  EflFect.  —  The  practical  ease  with  which 
the  holder  of  such  a  receipt  can  transfer  it  for  value  received, 
or  pledge  it  as  security,  has  led  to  considerable  litigation 
upon  such  instruments.  They  have  been  held  to  be  in  fact 
equivalent  to  promissory  notes. ^  Usually  they  embody  an 
express  promise,  in  terms,  to  pay ;  but  even  if  they  do  not, 
they  are  yet  the  bank's  acknowledgment  of  its  indebtedness, 
and  so  are  of  nearly  the  same  effect  as  if  they  expressly 
promised  payment.  Substantially,  therefore,  they  resemble 
promissory  notes,  and  the  courts  have  always  inclined  to  re- 
gard them  as  such,  especially  when  they  are  made  payable 
otherwise  than  immediately  and  upon  demand.  But  this  is 
not  a  necessary  feature.^  If  they  are  payable  at  a  future  day 
certain,  they  are  simply  promissory  notes,  neither  more  nor 
less.  If  a  bank  cannot  issue  its  negotiable  promissory  note, 
neither  can  it  issue  a  negotiable  certificate  of  deposit  of  this 
description.  If  the  note  would  be  void,  so  likewise  is  the 
certificate. 

If  a  bank  cannot  lawfully  issue  promissory  notes,  it  cannot 
issue  certificates  of  deposit  payable  at  a  future  day  with  inter- 
est, and  their  illegality  affects  all  parties,  however  innocent.^ 

If,  however,  the  bank  is  empowered  to  issue  promissory 
notes  subject  only  to  the  restriction  that  it  shall  issue  none 
which  are  designed  to  pass  into  circulation  as  currency,  but 
only  such  as  become  necessary  in  the  ordinary  course  and 
conduct  of  its  affairs,  and  are  strictly  business  paper,  then  it 
may  issue  certificates  of  deposit,  whether  payal)le  on  demand 
or  otherwise,  subject  only  to  the  same  restriction.  By  reason 
of  the  ease  with  which  such  instruments  may  be  used  for  cir- 

8  Seethe  following  cases:  Curtis  r.  Leavitt,  15  N.  Y.  19;  Barnes  w. 
Ontario  Bank,  19  N.  Y.  152;  State  Bank  v.  Kain,  1  Breese,  45;  State 
Bank  v.  Lock,  4  Dev.  533. 

1  §  208.    Gate  r.  Patterson,  25  Mich.  191 ;  Mills  v.  Barney,  22  Cal.  240. 

2  Poorman  v.  Mills,  35  Cal.  118. 

8  Bank  of  Pennsylvania  v.  Farnsworth,  18  111.  563;  Bank  of  Orleans 
V.  Merrill,  2  Hill,  295;  Ontario  Bank  v.  Schermerhorn,  10  Paige,  109; 
Bank  of  Chillicothe  v.  Dodge,  8  Barb.  233. 
518 


ARE  THEY   PROMISSORY   NOTES  ?  §  298 

culation,  the  courts  have  often  been  rigid  in  scrutinizing 
them,  and  applying  the  strict  letter  of  the  law  to  them ;  but 
they  have  never,  that  we  have  found,  substantially  modified  or 
departed  from  the  general  principles  above  laid  down.*  If  the 
certificate  be  in  law  a  promissory  note,  the  same  rules  as  to  in- 
dorsements in  blank,  the  right  of  the  holder  to  sue,  (tc,  which 
govern  promissory  notes,  will  also  govern  the  certificate.^ 

Massachusetts  distinguishes  a  certificate  of  deposit  from  a 
promissory  note  payable  on  demand,  because  the  certificate 
states  the  deposit  of  a  sum  of  money  by  the  person  certificate  of 
to  whom  it  is  issued,  and  more  especially  because  it  pXTsson-* 
is  not  payable  until  demand  is  made  and  the  certifi-  note  merely. 
Gate  is  either  returned  or  tendered.  It  says  also  that  they  are 
desigyied  to  circulate  as  money ^  like  bills  of  the  bank,  and  to  be 
used  for  convenience  and  safety.  Such  a  certificate  is  there- 
fore said  not  to  come  within  the  language  of  the  Massachu- 
setts General  Statutes,  c.  52,  §  10,  making  a  promissory  note 
on  demand  in  the  hands  of  a  third  party  subject  to  all  the 
equities  between  the  original  parties.^ 

If  there  are  no  words  of  promise,  the  instrument  is  a  simple 
receipt;'''  and  in  this  case  it  was  held  that  it  was  not  a  written 
contract  Avithin  the  rule  excluding  parol  evidence  to  contra- 
dict or  vary  it. 

*  Curtis  V.  Leavitt,  15  N.  Y.  19;  Leavitt  v.  Palmer,  .3  Comst.  19; 
Barnes  v.  Ontario  Bank,  19  N.  Y.  152;  Bank  of  Orleans  v.  ]\Ierrill,  2 
Hill,  295;  Southern  Loan  Co.  i'.  IMorris,  2  Barr,  175;  Craig  i'.  State  of 
Missouri,  4  Pet.  433;  Miller  v.  Austen,  13  How.  218;  Kilgore  v.  Bulkley, 
14  Conn.  362;  Laughlin  v.  Marshall,  19  111.  390;  Bank  of  Pennsylvania  v. 
Farnsworth,  18  id.  .563;  Lindsey  i'.  McClelland,  18  Wis.  481;  White  v. 
Franklin  Bank,  22  Pick.  181;  Bank  of  Chillicothe  v.  Dodge,  8  Barb.  233; 
Bank  Commissioners  r.  St.  Lawrence  Bank,  3  Seld.  513;  Cate  v.  Patter- 
son, 25  Mich.  191;  Pardee  v.  Fish,  CO  N.  Y.  265;  Miller  v.  Austen,  13 
How.  (U.  S.)  218;  Poorman  v.  Mills,  35  Cal.  118,  and  other  California 
cases  therein  cited. 

6  Poorman  v.  Mills,  55  Cal.  118;  Pardee  v.  Fish,  CO  N.  Y.  265;  Miller 
V.  Au.sten,  13  How.  (U.  S.)  218. 

6  Shute  r.  Pacific  National  Bank,  136  Mass.  487;  citing  Bellows  Falls 
Bank  v.  Rutland  County  Bank,  40  Vt.  377;  IMunger  v.  Albany  County 
Bank,  85  X.  Y.  580;  ]\Ierchants'  Bank  v.  State  Bank,  10  Wall.  604. 

"  Hotchkiss  V.  Mosher,  48  N.  Y.  482. 

519 


§  299  CERTIFICATES   OF   DEPOSIT. 

But  in  Indiana  this  case  has  been  severely  criticised,  as 
based  on  no  authority,  and  as  inconsistent  with  the  holdings 
of  many  courts  to  the  effect  that  a  written  order  for  property 
is  a  contract  containing  a  promise  to  pay.^  The  law  imports 
into  tlie  order  a  promise  to  pay,  and  no  parol  evidence  of  a 
previous  or  concurrent  agreement  can  be  admitted  to  vary  it. 
It  seems  clear,  liuwever,  that,  unless  there  is  in  the  instru- 
ment an  undertaking  to  pay,  it  is  not  a  jtromissory  note.^ 

§  299.  Negotiability  of  Certificates  of  Deposit.  —  A  certifi- 
cate of  deposit  may  or  may  not  be  made  negotiable.  It  may 
be  made  payable  to  A.  B.,  when  it  is  not  negotiable.  It  may 
be  made  payable  to  A.  B.  or  order,  when  it  is  negotiable  by 
indorsement.  It  may  be  made  payable  to  A.  B.  or  bearer, 
when  it  is  negotiable  by  simple  delivery. 

The  best  view  is  that  a  certificate  of  deposit  is  negotiable 
if  it  contains  words  of  negotiability,  as  to  A.  B.  or  order,  or 
Best  view  to  bearer,^  though  Pennsylvania  does  not  agree  to 
holds  it  ne-  ^i^g  ^j^^  r^  certificate  bearing  interest,  and  payable 
I'a.  contra.  Qj^jy  to  the  oi'dcr  of  the  depositor  on  return  of  the 
certificate,  was  held  to  be  only  a  special  agreement  to  pay  to 
any  one  presenting  the  certificate  and  depositor's  order,  and 

8  Long  V.  Straus,  107  Ind.  94;  Gavmire  v.  State,  104  Ind.  444;  Ander- 
son V.  State,  65  Ala.  553;  State  t'.  Keeler,  80  N.  C.  472;  Commonwealth 
V.  Fisher,  17  Mass.  46;  United  States  v.  Book,  2  Cranch  C.  C.  291 ;  People 
V.  Shaw,  5  Johns.  236;  State  v.  Morgan,  35  La.  An.  293;  Burke  v.  State, 
66  Ga.  157. 

9  1  Amer.  L.  Cas.  307. 

1  §  299.  IMiller  u.  Austin,  13  How.  218;  O'Neill  v.  Bradford,  1  Binn. 
390;  1  Parsons  on  Bills,  26;  Frank  v.  Wessols,  64  N.  Y.  155;  Pardee  v. 
Fish,  60  N.  Y.  268;  Bellows  Falls  Bank  v.  Rutland,  40  Vt.  377;  Loughliu 
V.  Marshall,  19  III.  390;  Fultz  v.  Walters,  2  Mont.  165;  Drake  v.  Markle, 
21  Ind.  433;  Trip  v.  Curtenius,  36  Mich.  494  (1877);  Bank  of  Pennsyl- 
vania r.  Farnsworth,  18  111.  563;  Lynch  v.  Goldsmith,  64  Ga.  42;  Gregg 
r.  Union  Co.  National  Bank,  87  Ind.  238;  National  State  Bank  v.  Ringel, 
51  Ind.  393;  Blood  v.  Northrup,  1  Kans.  28;  Piner  v.  Clary,  17  B.  Mon. 
645  (Ky.);  Talladega  Ins.  Co.  v.  Woodward,  44  Ala.  287;  Fells  Point 
Savings  Institution  v.  Weedon,  18  Md.  528;  Poorman  v.  Mills,  35  Cal. 
118;  Brumraagin  v.  Tallant,  29  Cal.  503;  Wei  ton  v.  Adams  &  Co.,  4  Cal. 
37;  Mills  v.  Barney,  22  Cal.  240;  Howe  v.  Hartness,  11  Ohio  St.  449; 
Bean  v.  Briggs,  1  Iowa,  488. 
520 


NEGOTIABILITY.  §  299 

not  a  negotiable  note;'-^  and  a  holder  taking  by  indorsement 
after  atiaclnnent  of  the  fund  by  a  creditor  of  the  depositor 
takes  subject  to  the  attachment.^ 

(rt)  It  has  been  held  that  if  it  be  expressed  as  payable  "  in 
currency,"  or  "  in  current  funds,"  or  the  like  phraseology,  it 
is  not  negotiable,  because  it  is  not  made  payable  in    .,j^  ^^^^^^^ 
money,  but  in  that  which  at  the  time  of  payment   funds"  or 
may  or  may  not  be  money.     A  tender  in  any  of  the    la-id  not  ' 

n     ,        ,        ^  o    ,-,        r\.    I  11     negotiable. 

circulating  notes  of  the  banks  of  the  btate  would 
seem  sufficient  to  satisfy  the  requirements  of  an  instrument 
so  worded  ;  and  courts  will  not  consider  current  funds  to  be 
necessarily  cither  money  or  equivalent  to  money.* 

In  Indiana,^  Pennsylvania,^  and  North  Carolina,^  a  certifi- 
cate of  deposit  payable  "  in  current  funds  "  is  not  regarded 
as  payaljle  in  "  money,"  and  is  therefore  not  negotiable.  But 
the  better  opiniou  is  that  "  cnrrency "  or  "current  funds" 
means  money  and  does  not  interfere  with  the  negotiability  of 
the  certificate. 

(6)  "  Currency  "  in  a  certificate  of  deposit  means  money, 
including  bank  notes,  which,  though  not  an  absolute  uQ^rrencv" 
legal  tender,  are  issued  by  authority  of  law,  and   held  to  mean 

1       .        1      •  J  -i^i      money. 

are  in  actual  and  general  circulation  at  par  witli 
coin.     Such  certificates  are  negotiable.^ 

(c)  A  certificate  of  deposit  payable  in  current  "in  current 
funds  is  negotiable.^  ^""'^'•" 

In  an  Iowa  case  a  bank  having  for  collection  a  certificate 

2  Patterson  v.  Poindexter,  6  Watts  &  S.  227;  Charnley  v.  Dallas,  8 
Watts  &  S.  353;  Gillespie  v.  Mather,  10  Pa.  28. 

3  Lebanon  Bank  v.  Morgan,  28  Pa.  St.  452. 

*  Ford  V.  JNIitchell,  17  Wis.  304,  and  cases  cited ;  Piatt  v.  Sauk  County 
Bank,  17  id.  222;  Lindsey  v.  McClelland,  18  id.  481. 

5  National  State  Bank  of  Lafayette  v.  Ringel,  51  Ind.  393  (1875). 

6  McCormick  v.  Trotter,  10  Serg.  &  Rawle,  94;  Wharton  v.  Morris, 
1  Dall.  125. 

7  Johnson  v.  Henderson,  7G  N.  C.  227. 

8  Klanber  r.  Biggerstaff,  47  Wis.  551 ;  Drake  r.  Markle,  21  Ind.  433. 

9  Citizens'  National  Bank  v.  Brown,  11  N.  E.  799  (Ohio,  June,  1887); 
Whelan  v.  Childress,  7  Humph.  303  (Tenn.);  Kirkpatrick  v.  McCuUough, 
3  Humph.  171;  Simpson  v.  Moulder,  3  Cold.  429  (Tenn.) 

521 


§  300  CERTIFICATES    OF   DEPOSIT. 

payable  "  in   current   funds "  protested   it  without  allowing 
ffrace,   thereby    discharo-ino;  the   indorser.     There 

Grace.  !  .  ,  ^ . 

were  in  evidence  two  customs :  (1)  to  regard  cur- 
rent funds  as  meaning  legal  tenders  and  national  bank  notes, 
thereby  making  the  certificate  negotiable,  and  as  it  was  pay- 
able one  year  after  date,  it  was  entitled  to  grace  ;  (2)  a  local 
usage  of  the  banks  to  regard  such  certificates  as  payable 
without  grace.  It  was  held  that  the  bank  was  bound  to  know 
the  law,  but  was  not  held  to  knowledge  of  the  first  usage,  and 
that  the  second  usage  protected  it  from  the  charge  of  negli- 
gence brought  by  the  holdcr.^^ 

§  300.  Transfer  of  Certificates. — A  certificate  of  deposit 
prima  facie  represents  an  undertaking  on  the  part  of  the  bank 
to  pay  the  depositor  on  demand,  and  a  transfer  of  the  certifi- 
cate will  transfer  all  the  rights  possessed  by  the  depositor 
against  the  bank  in  respect  to  the  deposit.^  It  is  an  agree- 
ment to  pay  the  holder  of  the  certificate  properly  indorsed, 
and  the  bank  is  liable  to  a  bona  fide  holder  though  it  has 
already  paid  the  deposit  to  the  depositor.^ 

S.,  who  owed  P.  $388,  made  a  deposit  of  1388  intended  for 
P.;  by  P.'s  consent  the  deposit  became  his,  with  complete  title 
by  indorsement  to  him  of  the  certificate  of  deposit.^ 

A  third  person  may  become  the  owner  of,  and  have  a  right 
to  demand  payment  upon,  a  certificate  of  deposit  without  in- 
^  , .  dorsement,  even  though  it  be  payable  to  order.  As 
may  exist       wlicrc  H.  dcpositcd  moncv  of  W.,liis  wife,  and  took 

withnut  111-  ^  '  . 

dorsemciif,  a  Certificate  of  deposit  ])ayablc  to  II.  or  order, 
certiiicatc  is  whicli  he  gavo  to  W.  without  indorsing.  W.  de- 
manded payment  from  the  bank,  notifying  it  of  her 
right  to  the  fund,  and  11.  also  claimed  the  money.  It  was 
held  that  the  bank  must  pay  W.^ 

"  Haddock  v.  Citizens'  National  Bank,  53  Iowa,  542  (1880).  See 
IVIechanics'  Bank  v.  Merchants'  Bank,  G  Met.  D,  wliere  a  usage  of  Boston 
banks  to  protest  post  notes  withont  grace  was  admitted  to  protect  a  bank, 

1  §  :5()0.     Miller  v.  Austen,  13  How.  228. 

^  National  Bank  v.  Washington  County  National  Bank,  5  Hun,  605. 

8  Phillips  V.  Franciscus,  52  Mo.  370  (1873). 

*  Cassedy  v.  First  National  Bank,  30  Minn.  8G. 

522 


CERTIFICATES    OF    DEPOSIT,  §  302 

§  301.  Statute  of  Limitations.  (Seo  §  321.)  —  Runs  on  a 
certificate  of  deposit, — 

(1.)  From  demand,  according  to  the  better  opinion,  it  be- 
ing intended  to  circulate  as  money,  so  far  as  to  make  it  a 
continuing  security,  and  the  very  nature  and  terms  of  the 
contract  making  the  deposit  payable  only  on  demand,  thus 
reversing  the  rule  that  applies  to  notes  ordinarily,  requiring 
the  maker  to  seek  out  the  creditor  and  pay  him ;  and  it 
may  be  added  that,  since  the  best  authorities  hold  that  a 
depositor  cannot  sue  the  bank  for  his  de})0sit  before  demand, 
(except  in  special  cases,)  and  that  the  statute  only  runs 
against  the  deposit  from  such  demand,  and  since  the  certifi- 
cate of  deposit  is  only  evidence  of  the  contract  which  exists 
in  every  case  of  deposit,  implied  if  not  expressed,  therefore 
it  should  be  subject  to  the  same  rules.  Merely  writing  down 
a  contract  does  not  change  its  nature.  The  bank  is  in  no 
default  until  demand  is  made. 

(2.)  To  the  contrary,  there  arc  some  cases  holding  that 
the  certificate  is  a  promissory  note,  and  subject,  along  with 
such  notes,  to  the  rule  that  no  demand  is  necessary  before 
suit,  and  that  the  statute  runs  from  the  date,  or  from  the 
delivery,  (whichever  is  latest,)  of  the  instrument. 

§  302.  Certificates  of  Deposit  and  the  Statute  of  Limitations. 
—  A  certificate  of  deposit  is  in  legal  effect  a  prom-  „  ^  ,  . 

_    i  _  ^  '■         ^       By  first  view 

issory  note,  is  due  immediatelv,  and  no  demand  is   statute  runs 

._  icT'-ii-  •!     fi'om  date. 

necessary  to  set  the  btatute  ot  Limitations  running.^ 

(a)  In  the  case  cited  from  Michigan,  the  court  thought 
that,  as  a  certificate  of  deposit  is  a  promissory  note  payable 
on  demand,  the  principles  governing  such  notes  should  be 
applied.  It  did  not  then  perceive  the  effect  of  the  facts 
that  a  certificate  of  deposit  is  meant  to  circulate  as  money, 
and  is  evidently  intended  to  be  a  continuing  security,  &c. ; 
but  in  a  later  case  the  Michigan  court  said  that,  if  second  view 
the  question  were  open,  it  should  decide  with  New   f'*^'"'^^<^- 

1  §  302.  Mitchel  t;.  Wilkins,  33  N.  W.  910  (Minn.),  following  Cassedy 
V.  Bank,  30  Minn.  87;  Brummagin  v.  Tallant,  29  Cal.  503;  Curran  v. 
Witter,  31  N.  W.  705  ("Wis.,  March,  1887)  ;  Meadow  v.  Dollar  Savings 
Bank,  56  Ga.  G05;  Tripp  i\  Curteuius,  30  Mich.  494. 

523 


§  302  CERTIFICATES   OF    DEPOSIT. 

York  tliat  a  certificate  of  deposit  did  not  become  due  till 
demand. - 

{h)  Where  the  certificate,  as  is  not  nnfrequently  the  case, 
states  that  the  amount  is  payable  "on  the  return  of  this 
The  two  certificate,"  or  on  its  presentment,  or  other  such 
iiL  and  vt.  jthrase,  this  language  does  not  alter  the  legal  effect 
of  the  instrument.  As  a  promissory  note,  naming  no  place 
of  payment,  —  for  a  heading  with  the  name  of  the  bank  is 
not  such  a  naming,  —  its  maker,  the  bank,  is  bound  to  find 
it  out  and  offer  to  pay  it;  and  not  till  then  can  a  return 
of  it  be  claimed.  Neither  is  the  holder  generally  deemed 
to  be  under  any  obligation  to  present  it  for  payment  before 
suit  ui)on  it.-'^  Though  where  a  certificate  was  given  to  A., 
"payaljle  to  order  of  himself  on  presentation  of  this  certificate 
properly  indorsed,"  the  court  regarded  this  as  so  far  like  an 
ordinary  deposit  that  A.  could  not  sue  the  bank  upon  it 
without  a  previous  demand.* 

(c)  In  Massachusetts  it  is  said  that  a  certificate  of  deposit 
is  not  like  a  promissory  note  on  demand  so  far  as  concerns 
Mass.  the    Statute   of   Limitations,   for  upon  such  notes 

Seoonrtview,  i\^q  statute  ruus  from  their  date,^  while  a  ccrtifi- 

statute  runs 

from  demand,  catc  is  not  duc  Until  demand,  being  intended  to 
circulate  as  money .^ 

And  in  Pennsvlvania  the  statute  docs  not  run 
Pa. 

until  demand."  So  it  is  in  New  York  and  In- 
diana. The  very  nature  of  the  instrument  shows  that  it 
N.  Y.  and  represents  money  actually  left  with  the  bank  to  be 
^^^'  retained  until  demanded.^ 

2  Birch  ;;.  Fisher,  51  Mich.  39. 

8  Hunt  V.  Divine,  37  111.  137;  Smilie  v.  Stevens,  39  Vt.  315,  affirmed 
in  Bellows  Falls  Bank  v.  lliitland  County  Bank,  40  id.  377. 

4  Bellows  Falls  Bank  v.  Rutland  County  Bank,  40  id.  377. 

6  Field  V.  Nickerson,  13  Mass.  131. 

c  Shute  V.  Pacific  National  Bank,  136  Mass.  487. 

'  ]\IcGough  V.  Jamison,  107  Pa.  St.  336  (1S84). 

8  National  Bank  v.  Washington  County  National  Bank,  5  Hun,  607; 
Munger  v.  Albany  City  National  Bank,  85  N.  Y.  r)87;  Boughton  v.  Flint, 
74  N.  Y.  476;  Howell  v.  Adams,  68  N.  Y.  314;  Brown  v.  McElroy,  52 
Ind.  404;  Smiley  v.  Frye,  100  N.  Y.  262. 
52-i 


STATUTE   OF   LIMITATIONS.  §  304 

(cZ)  It  seems  clearly  reasonable  that  the  Statute  of  Limi- 
tations should  not  be  deemed  to  begin  running  until  demand. 
The  contract  of  the  parties  is  to  pay  "  on  presentation  of  the 
certificate,"  and  this  changes  by  express  agreement  the  or- 
dinary rule  that  the  debtor  must  seek  the  creditor  and  pay 
his  debt,  on  which  rests  the  rule  that  a  debt  can  be  sued 
for  without  demand.  In  case  of  a  certificate  of  deposit,  or 
in  any  case  where  there  is  an  agreement  express  or  implied 
that  the  creditor  shall  seek  the  debtor,  neither  party  is  in 
fault  until  demand  is  made,  and  the  statute  should  not  run 
until  then,  although  of  course  the  creditor  may  pay  at  any 
time.^ 

§  303.  When  a  Certificate  of  Deposit  is  stale.  —  A  lapse  of 
thirty-one   davs   does   not   raise    the    presumption   _ 

-'  "  rf  1      ,      Thirtv-one 

that  it  is  dishonored  paper,  even  in  States  which   days  not 
hold  that  a  certificate  of  deposit  is  due  at  its  date.^ 

Where  the  owner  has  indorsed  the  certificate,  and  care- 
lessly allowed  it  to  pass  beyond  his  control,  one  who  buys 
it  in  good  faith,  for  value  and  within  a  reasonable  time,  is 
entitled  to  protection.^ 

But  (as  is  held  by  some  courts  as  in  regard  to  checks) 
a  certificate  of  deposit  is  stale  after  six  years,  and  is  taken 
as  dishonored  paper,  and  the   holder   cannot   en-   „  , 
force  its  second  payment   by   the   bank.^     But  in   after  six 
New   York  a  transfer   of  a  certificate  (that  bore   not  in  New- 
interest)  seven  years  after  date  docs   not   subject     ^"^  ' 
the  holder  to  prior  equities.^ 

§  304.  Payment  by  Certificates  of  Deposit.  —  In  general  only 
Conditional  Payment. — A  certificate  of  deposit  is  presumed 
to  be  taken,  not  as  cash,  but  as  a  convenient  means  of  ob- 

9  Hunger  v.  Albany  City  National  Bank,  85  N.  Y.  587 ;  Pardee  r.  Fish, 
60  N.  Y.  2(35;  Bellows  Falls  Bank  i'.  Rutland  County  Bank,  40  Vt.  377; 
Fells  Point  Savings  Institution  v.  Weedon,  28  Md.  320. 

1  §  303.    Birch  v.  Fisher,  51  ^lich.  30  (1883). 

2  Gregg  V.  Union  County  National  Bank,  87  Ind.  238.  See  also  Tripp 
r.  Curtenius,  3G  Mich.  407  (1877). 

'^  National  Bank  v.  Washington  County  National  Bank,  5  Hun,  605 
(187.1). 

525 


§  305  CERTIFICATES   OF   DEPOSIT. 

taining  cash,  and  where  a  certificate  was  given  as  a  loan, 
and  the  bank  failed  before  maturity,  the  lender  was  held  to 
bear  the  loss.^ 

§  305.  Collecting  Bauk  taking  its  ovrn  Certificates  in  Payment. 
—  B}^  custom  banks  receive  their  own  certificates  of  deposit 
as  payment,  and  such  custom  will  be  judicially  noticed  by  the 
courts,  and  will  justify  a  collecting  bank  in  receiving  its  own 
certificate  of  deposit  in  payment  of  paper  it  holds  for  collec- 
tion ;  and  tha  debtor  is  discharged,  even  though  the  bank 
fails  before  remitting.  And  especially  will  this  be  so  where 
the  owner  of  the  pa})er  directed  the  bank  to  remit  by  draft, 
for  he  is  presumed  to  have  intended  a  draft  of  the  collecting 
bank.^ 

From  the  language  of  the  court  in  this  case  it  would  seem 
that,  custom  or  not,  the  payment  ought  to  be  good.  "The 
plaintiff  in  effect  claimed  that  the  debtor  should  have  pre- 
sented his  certificates  of  deposit  at  the  bank  counter,  and  had 
the  money  counted  out  to  him,  and  then  counted  it  back  to 
the  cashier.  The  law  does  not  require  any  such  vain  and 
unnecessary  formality." 

This  is  sound,  of  course,  if  the  certificate  would  really  have 
been  paid  by  the  bank,  and  the  fact  that  the  bank  received 
it  as  payment  is  proof  that  it  would  have  paid  cash  if  de- 
manded. In  respect  to  the  transaction  as  a  question  of  cus- 
tom, the  court  said  that  the  ignorance  of  the  plaintiff  as  to 
the  existence  of  such  usage  was  of  no  moment ;  every  business 
man  must  be  held  to  know  the  method  by  which  nearly  all 
banks  in  the  country  transact  business  by  checks,  drafts,  and 
certificates  of  deposit. 

A.  sold  land  to  B.,  and  forwarded  the  deed  to  the  C.  bank, 
to  be  delivered  to  B.  on  payment  to  the  C.  bank  of  $2,000, 
Takinir  its  wliich  was  to  be  remitted  to  A.  at  once.  The  bank 
own ctititi-     took  its  own  certificates  of  deposit  from  B.,  and 

cate  lu'ld  to  ^  ' 

be  a  fraud,  failed  tlic  sauic  night  before  remitting  to  A.  Held 
positorpre-  it  was  a  fraud  on  A.  to  take  the  certificates  instead 
*^"^  ■  of  cash,  and  that  the  funds  in  the  hands  of  the 

1  §  304.   Burrows  v.  Bangs,  34  Mich.  304  (1876). 
^  §  30.5.   British  &  American  Mortgage  Co.  v.  Tibbals,  63  Iowa,  468. 
526 


CERTIFICATES   OF    DEPOSIT.  §  308 

assignee  were  impressed  with  a  ti'ust  in  favor  of  A.  to  the 
extent  of  $2,000,  which  should  be  paid  in  preference  to  other 
claims.2 

§  300.  Lost  Certificate.  —  A  negotiable  certihcate  of  deposit 
lost  before  indorsement  cannot  give  the  finder  any  title,  and 
although  it  says  "  payable  on  return  of  this  certificate,"  the 
bank  has  no  right  to  require  a  bond  of  indemnity  from  the 
depositor  before  paying  him  the  money. ^ 

No  one  can  be  a  bona  fide  taker  of  a  certificate  of  deposit, 
unless  he  takes  within  a  reasonably  short  time;  otherwise 
banks  could  issue  certificates  with  the  same  effect  as  bank 
bills.  If  a  certificate  is  due  at  the  time  of  its  loss,  the  sub- 
sequent holder  is  subject  to  the  equities,  and  a  payment  by 
the  bank  to  the  loser  would  bar  an  action  by  such  holder, 
wherefore  no  bond  of  indemnity  is  required.- 

§  307.  Interest  on  Certificate  of  Deposit.  —  A  rate  of  interest 
specified,  as  six  per  cent  from  date,  continues  after  maturity, 
and  until  the  certificate  is  paid.^ 

§  308.  Certificate  to  Order  of  Husband  or  Wife.  —  S.  depos- 
ited money  and  received  a  certificate  payable  "  to  the  order 
of  S.,  or  of  E.,  his  wife."  It  was  held  that  the  Death  of 
death  of  S.  revoked  the  power  of  E.  to  draw  the  ^okS  wife's 
money  ;  during  the  life  of  S.  her  power  was  that  of  po^^""- 
an  agent,  and  S.  could  have  revoked  it  at  any  time,  and  the 
death  of  the  principal  revoked  the  agent's  authority.i 

It  would  seem  much  more  probable  that  the  intent  of  such 
an  arrangement  was  to  give  the  wife  a  power  over  the  de- 
posit concurrent  with  that  of  S.,  or  at  least  only  second  to  it, 
and  that  the  death  of  S.,  instead  of  diminishing  the  power 
of  E.,  only  eliminated  the  power  of  S.  and  left  that  of  E. 
to  reign  alone.     If  a  thing  may  be  done  by  S.  or  by  E.,  the 

3  Francis  v.  Evans,  33  N".  W.  93  (Wis.). 

1  §  306.  Citizens'  National  Bank  v.  lirown,  11  N.  E.  799  (Ohio, 
June,  1887). 

2  Brown  v.  Citizens'  National  Bank,  38  Bank.  Mag.  135. 

1  §  307.  Cordell  v.  First  National  Bank  of  Kansas  City,  64  Mo.  600 
(1877);  Payne  v.  Clark,  23  Mo.  259  (188G). 

1  §  308.  Baltimore  v.  Wrightstown ,  63  Md.  81  (1S84) ;  citing  Murray 
V.  Cannon,  41  Md.  476. 

527 


§  309  CERTIFICATES   OF   DEPOSIT. 

vanishing  of  the  term  S.  leaves  E.  the  only  one  able  to  do 
that  thing,  —  in  this  case  drawing  the  money.  The  other  con- 
struction makes  the  whole  sentence  equal  only  to  the  first 
clause. 

§  309.  Interest  Accounts.  —  Ordinarily,  as  to  deposits  in  an 
incorporated  bank  the  rule  is  that  a  general  deposit  draws 
no  interest^  unless  by  agreement  until  upon  demand  for 
payment  it  is  refused  or  unreasonably  delayed,^  and  defend- 
ing a  suit  in  good  faith  is  not  unreasonable  or  vexatious 
del  ay  .3 

But  private  bankers  usually  pay  interest  on  customers' 
balances,  and,  e  converse,  charge  interest  on  their  overdrafts. 
With  us,  however,  it  is  a  proper  subject  of  a  special 
agreement  or  understanding  between  the  parties. 
In  England  it  might  be  judicially  noticed  and  assumed  by 
the  courts  as  the  regular  course  of  business.  But  proba- 
bly it  would  not  be  so  with  us,  where  private  banking  is  car- 
ried on  much  less  extensively.  Such  agreements  may  be 
entered  into  also  with  an  incorporated  bank,  though  certainly 
they  would  never  be  assumed  in  dealings  with  a  corpora- 
tion or  association,  however  it  might  be  with  a  firm  or  an 
individual  in  the  business.  It  naturally  happens  that  nearly 
all  the  cases  which  we  find  on  this  subject  are  English.* 
They  chiefly  concern  disputes  which  arise  as  to  when  rests 
may  be  taken,  and  as  to  what  rate  of  interest  shall  be  al- 
lowed in  cases  not  specifically  provided  for  by  a  distinct 
agreement. 

(a)  Usage,  if  it  contravenes  no  law,  will  govern  in  such 
Usage  and  Controversies.  So  when  a  banker  and  his  customer 
dealing.         are  shown  to  have  conducted  their  banking  account 

1  §  309.    First  National  Bank  v.  Coleman,  11  Brad.  511. 

2  Parkersburg  National  Bank  v.  Als,  5  W.  Va.  50;  Jassoy  v.  Horn, 
64  111.  379;  Stearns  v.  Brown,  1  Pick.  531;  Dodger.  Perkins,  9  Pick.  368; 
Pierce  v.  Rowe,  1  N.  H.  182;  Griswold  v.  Chandler,  5  N.  H.  497;  Wen- 
dell V.  French,  19  N.  H.  213;  Starke  v.  Gamble,  43  N.  H.  468;  Parsons 
V.  Treadwell,  50  N.  II.  356. 

8  Aldrich  V.  Dunham,  16  111.  403. 

^  Gwyn  V.  Godby,  4  Taunt.  346;  Ikin  v.  Bradley,  5  Price,  536;  Cross- 
kill  V.  Bower,  32  Beav.  86. 
528 


INTEREST   ON    DEPOSITS.  §  309 

for  a  series  of  years  upon  a  certain  specifiecl  system,  which  is 
not  in  itself  intrinsically  illegal,  it  will  be  assumed  that  that 
system  had  been  originally  agreed  upon  between  them,  and 
the  principles  involved  in  it  will  be  held  binding  for  the  solu- 
tion of  any  subsequent  disagreement.^  But  acquiescence  in 
the  general  system  docs  not  go  further  than  to  fix  the  prin- 
ciple upon  which  the  accounts  shall  be  computed ;  it  does  not 
admit  the  accuracy  of  particular  items,  any  of  which  may  be 
disputed.^ 

{b)  It  is  necessary,  however,  that  the  principle  which  it  is 
sought  thus  to  establish  should  be  one  which  is  in  itself 
strictly  le<»;al.     Thus,  it  cannot  be  questioned  that   ,, 

*'        °  '  '■  ,        ,       Laniiot  con- 

a  bank,  or  banker,  equally   with   any  other  indi-   troi  the 

...  usury  laws. 

vidual,  is  subject  to  the  operation  ot  the  usury 
laws,  and  cannot  exact  more  than  the  legal  rate  of  interest, 
either  directly  or  indirectly.  The  custom  pursued  in  dis- 
counting, of  deducting  the  interest  at  the  beginning  of  the 
term  of  the  loan,  thereby  in  fact  gaining  a  very  little  more 
than  the  strict  legal  rate,  is  allowed,  and  has  been  sanctioned 
by  the  courts.  This  matter  is  treated  under  the  topic  "  Dis- 
count." 7 

(c)  One  of  the  most  common  methods  of  circumventing 
the  usury  laws  is  bv  taking  "rests"  at  very  short    „„  ^  „ 

•'  ./  .-3  ./  "Rests,"  or 

intervals,  and  so  compounding  the  interest  many   frequent 

•        1  c  •       1  mi     J.    compound- 

tmies,  perhaps,  m  the  course  oi  a  single  year,  ihat  ing  of  in- 
"  rests  "  may  be  taken  at  intervals  of  proper  length 
is  undoubted ;  the  only  question  is,  what  interval  is  proper  ? 
In  Clancarty  v.  Latouche,  supra,  a  compounding  at  tri-monthly 
rests  was  declared  to  be  usurious  and  intolerable.  In  Rufford 
V.  Bishop,^  it  was  said  that  the  decision  in  Clancarty  v.  La- 
touche seemed  to  throw  some  doubts  on  rests  at  a  less  interval 
than  one  year,  but  that  it  must  be  admitted  that  shorter  rests 
were  legal.  No  definite  rule  of  law  therefore  exists  on  the 
point.     In  the  United  States,  accountings  in  every  branch  of 

*  MoRse  ('.  Salt,  32  Beav.  260. 
«  Ibid. ;  Clancarty  v.  Latouche,  1  Ball  &  B.  120. 
"  Maine  Bank  v.  Butts,  9  Mass.  49. 
8  5  Buss.  31G.  * 

VOL.  I.  34  .529 


§  309  INTEREST    ACCOUNTS. 

business  are  customarily  had  iiioi-e  promi)tly  and  frequently 
than  is  usual  in  England,  and  it  is  quite  probable  that  tri- 
monthly  rests  might  be  sanctioned,  if  agreed  to  by  both 
parties. 

The  nature  of  the  customer's  indebtedness  to  his  banker  for 
advances  is  not  affected  by  the  fact  that  the  hnul  footing  is 
cast  so  as  to  include  interest,  which,  by  rests  at  proper  inter- 
vals, has  been  from  time  to  time  converted  into  princii)al,  and 
has  since  itself  also  borne  interest.  Hence  a  mortgage,  given 
generally  to  secure  the  customer's  balance,  will  secure  a  bal- 
ance of  which  such  interest,  and  interest  upon  interest,  are 
component  parts.^  But  where  a  mortgage  is  given  by  the 
customer  to  secure  a  specific  balance  owing  by  him  on  a  cer- 
tain day,  and  subsequent  transactions  are  had  between  the 
parties,  in  which,  as  well  as  in  those  which  had  preceded  the 
mortgage,  compound  interest  was  uniformly  charged,  it  was 
nevertheless  held  that  the  precise  sum  secured  by  the  mort- 
gage was  thereby  at  once  excepted  from  the  general  custom 
governing  the  other  dealings  of  the  parties,  and  that  interest 
could  not  thereafter  be  compounded  thereon,  but  must  be  cal- 
culated at  simple  rates,  as  in  all  cases  of  ordinary  mortgage 
debts.io 

(cZ)  When  a  judgment  is  recovered  by  the  bank  against  the 
customer  for  overdrafts  or  advances,  interest  will  be  allowed 
at  the  same  rate  which  the  bank  itself  was  paying 
tiementroi-  upou  dcposits  ou  the  samc  account."  But  where 
SrovsT  tlie  banker  and  the  customer  arrange  that  all  in- 
special  con-     (jebtedness  of  either  to  the  other  shall  bear  interest 

trflct'  rfliG  01 

interest  on  a  at  a  Certain  rate  per  cent,  yet  upon  the  death  of  the 
customer,  or  upon  his  closing  his  dealings  with  the 
banker,  being  at  the  time  indebted  to  him,  or  upon  his  in- 
solvency, or  upon  the  death  of  the  banker,  or  his  ceasing  to 
carry  on  business,  or  becoming  bankrupt,  the  special  arrange- 
ment at  once  ceases  to  operate,  and  from  the  date  of  such 
occurrence  the  balance  of  indebtedness  then  due  from  either 

8  Riifford  V.  Bishop,  supra. 

10  Mosse  V.  Salt,  32  Beav.  269. 

11  Gwyn  V.  Godby,  4  Taunt.  346;  Ikiu  v.  Bradley,  5  Trice,  536. 

530 


INTEREST   ACCOUNTS.  §  309 

to  the  other  carries  only  such  simple  interest  as  is  carried  by 
any  other  ordinary  contract  debt.'^ 

(e)  In  castinu:  interest  or  makin<>-  the  charge  to  the  drawer, 
it  is  clear  that  the  banker  must  debit  the  drawer  of  a  check, 
not  from  the  date  of  the  drawin*;;  but  from  the  date    x^ntowhat 
of  the  actual  payment  of  the  check. ^'"^    If  the  banker   time  interest 

'     "^  .  .  IS  to  be  cast 

accepts  the  check  some  time  before  actually  paying  on  a  deposit 
it,  it  has  not  been  decided  whether  he  may  debit  the  acceptance 
drawer  from  the  date  of  the  acceptance  or  from  that  °^*'^^'^  ■ 
of  the  paying.  But  it  has  been  said  that  the  accepting  of  a 
check  payable  at  a  day  future  is  equivalent  to  a  loan  of  the 
amount  named,  by  the  drawer  to  the  banker,  for  the  interval. 
Following  this  principle,  it  would  practically  amount  to  a 
debiting  at  the  time  of  payment.  For  if  the  debit  were  made 
at  the  time  of  acceptance,  yet  the  acceptance,  creating  at  once 
a  loan  from  the  depositor  to  the  banker  for  the  interval,  would 
cause  interest  to  run  on  the  same  sum,  for  the  same  period  at 
the  same  rate  per  cent,  from  the  banker  to  the  customer,  and 
the  one  amount  would  exactly  offset  the  other.  But  since  the 
acceptance  only  binds  the  banker,  at  his  own  peril,  to  have 
funds  enough  of  the  depositor  to  meet  it  when  payment  is 
demanded,  and  as  until  such  demand  he  has  the  full  use  of 
such  funds,  it  would  seem  interest  should  in  reason  be  cal- 
culated to  the  date  when  demand  may  be  made. 

Although  this  reasoning  is  good  as  to  an  acceptance  of  a 
check  before  delivery  by  the  drawer,  or  as  to  a  check  payable 
at  a  future  day,  yet  in  other  cases,  as  the  acceptance  amounts 
to  payment  so  far  as  the  drawer  is  concerned,  he  should  not 
receive  interest  upon  the  amount  of  the  check  after  such 
certification.  The  money  is  transferred  at  once  from  the 
drawer's  account  to  the  account  of  certified  checks,  and 
becomes  substantially  a  deposit  of  the  holder  of  the  check, 
and  if  any  one  receives  interest  he  should.  The  drawer 
should  not  receive  interest  on  funds  in  which  he  has  no 
interest. 

12  Crosskill  v.  Bower,  32  Beav.  86. 

18  Goodbody  v.  Foster,  cited  to  this  poiut  iu  Byles  on  Bills,  Shars- 
wood's  ed.,  p.  25. 

531 


§  309  INTEREST   ACCOUNTS. 

(/)  From  the  rule  that  the  banker  is  in  no  sense  a  trustee, 
or  quasi  trustee,  for  the  benefit  of  his  customer,  it  follows 
that,  under  an  ap-reemcnt  to  allow  interest,  he  is  under  no 
obligation  annually  to  balance  the  account  and  credit  the 
interest,  so  as  to  prevent  the  running  of  the  Statute  of 
Limitations.^^ 

"  Pott  V.  Clegg,  IG  M.  &  W.  321;  Foley  v.  Hill,  2  II.  L.  Cas.  40. 
532 


CHAPTER  XX. 

PAYMENT   OF   DEPOSIT. 

310.   Analysis.     See  Payment  of  Notes,  §  55G.    Of  Checks,  §  3G2.    Of  Forged 
Checks,  §  4G1. 
Duty  of  Bank. 

(A)    By  contract  implied  311  from  the  course  of  business,  it  is  the  duty  of 
a  bank  to  pay,  over  its  counter,  or  through  the  clearing-house,  348 
(according  to  tlie  manner  of  presentment,)  in  good  money  312  upon 
presentment  in  banking  hours  of  a 
Genuine,  461  valid,  310  subsisting. 

(The  bank  may  take  time  to  inquire  if  the  order  is  stale  or 
otherwise  suspicious.) 
Written,  313 

(It  may  pay  on  the  verbal  order,  if  it  so  elects,  but  is  entitled 
to  written  evidence  of  authority  for  a  payment.) 
Properly  drawn  order  for  the  whole  or  any  part  315  of  the  deposit, 
(if  the  order  is  bona  fide,  in  the  regular  course  of  business,  and  not 
merely  to  vex  the  bank  by  numerous  suits,)  signed  by  the  depos- 
itor, or  by  his  authorized  agent  314  or  representative,  or  by  the  per- 
son who  has  proved  his  ownership  of  the  deposit  against  the 
depositor,  565  and  341  if  the  bank  has  to  the  credit  of  the  drawer 
sufficient  available  funds  to  cover  the  order,  (if  the  bank  has  part 
funds,  its  duty  is  to  pay  as  much  as  it  can,  if  the  holder  is  willing 
to  receive  part  payment,  and  is  willing  to  give  up  the  order  to  the 
bank,  but  this  view  is  not  uniformly  adopted,)  and  free  from  a 
right  of  retention  by  the  bank,  in  consequence  of  a  lien,  323  set- 
off, 3-3  attachment,  346  injunction,  347  adverse  claim,  341  or  incum- 
brance, by  agreement  or  otherwise,  provided  that  the  Statute  of 
Limitations  321  lias  not  run  against  the  account. 
Misapplication.  317  And  it  is  no  excuse  for  a  bank's  refusal  to  honor 
an  order  properly  drawn  and  signed,  that  it  has  reason  to  believe 
that  the  moneys  (e.  g.  trust  funds)  are  to  be  applied  as  the  drawer 
has  no  right  to  apply  them,  unless  it  participates  m  the  profits  of 
the  payment  with  knouiedfje,  actual  or  constructive,  of  the  facts  that 
make  the  apjjlication  of  the  money  wrong ;  in  such  case  it  is  not 
only  excused,  but  prohibited  from  making  the  payment. 
But  it  is  an  excuse  tliat  it  has  been  forced  to  pay  by  a  power  it  could 
not  resist,  as  a  public  enemy .318 

533 


§311  PAYMENT    OF    DErO^^IT. 

If  the  drawer  has  revoked  the  order  before  the  bank  has  made  pay- 
ment or  boimd  itself  to  pay,  it  must  not  pay,  nor  if  tiie  drawer  is 
insane,  and  the  bank  knows  319  of  it,  (if  tiie  bank  pays  in  ignorance 
of  the  insanity,  it  will  be  a  good  payment,)  or  if  the  drawer  is  chad, 
not  being  a  corporation  or  a  firm,  (it  is  to  be  hoped  that  this  law  of 
revocation  by  death  as  to  checks  will  be  changed  by  statute,)  and 
the  payments  made  will  be  appropriated  365  in  their  order,  the  first 
sum  drawn  being  deemed  a  payment  }wo  tanto  of  the  first  sum  de- 
posited, even  though  some  of  the  items  of  the  account  were  trust 
moneys. 

This  is  the  general  rule  ;  but,  as  a  very  just  modification,  it  has  been 
held  that  a  depositor  will  be  presumed  355  to  be  drawing  his  own 
rather  than  trust  moneys  when  tlie  two  are  mingled,  though  the  lat- 
ter were  the  earliest  deposits  ;  and  if  trust  funds  can  be  traced  into  a 
deposit,  they  will  not  be  deemed  to  come  out,  so  long  as  the  payments 
can  be  otherwise  accounted  for. 

Any  payment  subsequent  to  the  trust  deposit  will  not  touch  it  so 
long  as  there  is  enough  other  money  to  make  the  payment,  even 
though  this  was  put  in  bank  after  the  trust  money,  but  before  the 
payment. 

Over-drafts  356  may  be  a  fraud  on  the  holder  of  the  order,  though  not 
on  the  bank ;  but  if  the  bank  pays,  whether  knowing  the  facts  or 
not,  it  can  recover  from  the  drawer. 
Void  Taper.     §  316. 

Corporate  obligations  that  are  ultra  vires  by  circumstances  unknown 
to  the  bank,  if  paid  by  it,  may  be  charged  to  the  obligor ;  but  it  is 
otherwise  if  the  bank  has  notice  of  the  facts  invalidating  the  paper, 
or  if  it  pays  on  paper  that  would  not  be  enforceable  in  the  hands  of 
a  bonajide  holder  for  value,  as,  for  example,  such  as  was  signed  under 
duress,  or  hy  an  infant,  &c. 
Payment  of  Checks.     §  480. 
Payment  of  Notes  and  Acceptances.     §  556. 
(B)   Succession  of  Banks.    §  320. 

When  one  bank  succeeds  to  the  business  and  assets  of  another,  the 
depositors  of  the  swallowed  bank  become  depositors  of  the  succes- 
sor, and  the  transfer  does  not  set  the  Statute  of  Limitations  running 
against  them. 


§  311.  Obligation  of  the  Bank  to  honor  Orders.  —  The 
bank  is  iiiulor  the  obligation  of  honoring  the  customer's 
drafts  and  checks  whenever  the  same  are  presented  for  pay- 
ment, provided  that  at  the  time  of  such  presentment  the  bal- 
ance of  the  account,  if  then  struck,  would  show  a  credit  in  favor 
of  the  customer  of  funds,  on  which  the  bank  has  no  lien,  suffi- 
cient to  meet  the  sum  called  for  by  the  check  or  draft.  The 
contract  so  to  honor  the  depositor's  orders  is  implied  from 
534 


bank's  obligation.  §  312 

the  usual  course  of  business.  The  deposit  is  made  with  the 
tacit  understanding  that  the  bank  shall  respond  to  tlie  de- 
positor's orders,  so  long  as  there  is  suflicicnt  balance  to  his 
credit.^ 

A  banker  "  gives  the  community  to  understand  that  those 
who  have  funds  in  his  hands  have  not  only  tho  right  to  draw 
upon  the  deposit,  but  that  all  drafts  will  be  paid  on  i)resen- 
tation  ;  he  opens  virtually  a  letter  of  credit  to  his  dejiosi- 
tor,  Avhich  is  a  guaranty  to  him,  as  well  as  to  all  who  make 
advances  on  the  faith  of  it.  For  all  practical  purposes  it 
assimilates  itself  to  a  parol  promise  to  pay  any  check  that 
the  owner  of  the  deposit  may  draw  ;  and  thus  the  rule  which 
binds  the  drawee  of  a  bill  of  exchange  as  an  acceptor,  when 
he  has  promised  in  advance  to  honor  it,  furnishes  a  strong 
analogy."  ^ 

*  §  312.  For  what  Description  of  Funds  Depositor  is  entitled 
to  Draw.  —  As  a  general  rule,  the  depositor,  having  once 
brought  his  funds  securely  into  the   hands  of  the    The  bank 

"  "^  ...       must  pay  in 

proper  officer,  and  having  duly  received  his  credit   money  (ewn 

.111  1  1        1  ii  rj.  though  the 

for  the  amount  in  dollars  and  cents,  has  thercatter  deposit  was 

a  perfect  claim  on  the  bank  for  this  amount,  in  Insoiven"  ^" 

money}     One  of  the  cited  cases  shows  that  when  a  {'e!,"''ti;g""'i3 

deposit  was  made  in  good  faith  of  the  bills  of  a  »"  agree- 

^  ^  ^  _  ment  to  the 

bank,  supposed  at  the  time  by  both  parties  to  be   contrary,  or 

,  ,  -..111.1.  1  ij  T  tlie  depositor 

solvent,  but  Avhich  had  in  tact  already  stopped  pay-  was  guilty  of 
ment,  and  the  amount  was  in  ordinary  course  passed  hTknew  o'f 
to  the  credit  of  the  depositor  as  so  much  money,  so  yencvOT in- 
many  dollars,  the  bank  was  held  to  repay  the  amount  sufTniency 

■'  .  of  funds. 

in  good  money  ;  although  it  was  shown  as  a  fact  §  6G2. 
that  the  bills  had  been  kept  by  themselves,  and  not  mingled 
with  the  general  funds  of  the  bank,  and  that  they  still  con- 
tinued so  when  the  insolvency  of  the  issuing  bank  was  dis- 
covered, when  the  receiving  bank  promptly  sought  to  undo 
the  credit.     Precisely  the  same  rule  applies  where  the  bank 

1  §  311.    Downes  v.  Phoenix  Bank,  6  Hill,  297;  Marzetti  r.  Williams, 
1  Barn.  &  Ad.  415;  Watson  r.  Phoenix  Bank,  8  Met.  217. 
"^  McGregor  v.  Loomis,  1  Disney,  2.51. 
^  §  312.    Thompson  v.  Riggs,  5  Wall.  663. 

535 


§  812  PAYMENT   OF   DEPOSIT. 

undertakes  to  make  a  collection  for  its  customer,  and  passes 
tlie  amount  to  his  credit.  (§  248.)  In  neither  case  is  there 
any  bailment  of  the  specific  funds  or  money  received  by  the 
bank ;  but  at  once,  upon  the  giving  credit  in  ordinary  form, 
the  simple  indebtedness  accrues  Avhich,  like  any  other  indebt- 
edness, can  only  be  discharged  in  funds  which  the  law  makes 
a  legal  tender.  This  has  been  repeatedly  held  in  the  Western 
States  where  bank  bills  of  the  so  called  "wild-cat  banks'' 
were  deposited,  and  credit  given  for  the  nominal  value  in 
dollars  and  cents.  Frequently,  the  depreciation  of  these  bills 
had  begun  at  the  time  of  deposit ;  often  they  sunk  almost 
immediately  afterwards  through  every  stage  of  depreciation  to 
utter  worthlessness.  But  the  courts  uniformly  held  that  the 
credit  given  for  so  much  money  could  only  be  discharged  by 
so  much  "  money,"  and  that  bills  similar  to  those  received,  or 
even  the  identical  ones,  could  not  be  forced  upon  the  customer 
in  payment.^  So  where  the  deposit  was  made  in  bills  of  the 
bank  itself,  and  they  were  at  the  time  greatly  depreciated,  it 
was  held  that  payment  must  nevertheless  be  made  in  full  in 
good  money.^  The  right  of  the  depositor  is  not,  however, 
necessarily  to  the  gold  or  silver  coin  of  the  country  ;  but  only 
to  such  money  as  is  by  the  law  of  the  land  legal  tender  at  the 
time.  Hence  it  has  been  held  that  a  deposit  made  in  1860  in 
gold  could,  after  the  passage  of  the  Legal  Tender  Act  so  called, 
be  paid  off  in  the  Treasury  notes  of  the  United  States  to  the 
same  nominal  amount,  without  regard  to  their  excessive  depre- 
ciation in  fact.*  Semhle  that  payment  by  a  bank  within  the 
Confederate  States,  made  in  Confederate  notes  to  a  United 
States  quartermaster,  under  the  stress  of  military  orders  of 

2  Corbit  V.  Bank  of  Smyrna,  2  ITarr.  235;  IMarine  Bank  of  Chicatro 
V.  Chandler,  27  111.  525;  Marine  Bank  of  Cliicago  r.  Birney,  28  id.  90; 
Marine  Bank  of  Chicago  v.  Rushmore,  id.  463;  Marine  Bank  of  Chicago 
V.  Ogden,  29  id.  218;  Chicago  Mar.  &  Fire  Ins.  Co.  v.  Carpenter,  28  id. 
360;  Willetts  v.  Paine,  43  id.  433;  Fort  v.  Bank  of  Cape  Fear,  1  rhill. 
(N.  C.)  417.     See  also  the  pages  on  the  "  Payment  of  Checks."    §  430. 

3  Bank  of  tlie  Commonwealth  of  Kentucky  i'.  Wister,  2  Pet.  318. 

4  Carpenter  v.  Xorthfield  Bank,  39  Vt.  46;  Sandford  v.  Hays,  52  Pa.  St. 
26;  Gumbel  v.  Abrams,  20  La.  Au.  568;  and  see  "  Special  Deposits." 

636 


I 


MUST  BE  IN  LEGAL  TENDER.  §  314 

the  United  States  general  commanding  in  the  place,  may 
acquit  the  indebtedness  of  the  bank  to  the  depositor,  provided 
the  original  deposit  was  made  in  Confederate  notes. '  But  a 
depositor  of  Confederate  notes,  thougli  at  the  time  of  the 
deposit  they  were  bankable  funds  at  the  place,  was  held  to  be 
not  entitled  afterward  to  recover  the  amount  from  the  bank 
in  good  money .*^  Of  course  any  local  custom  to  make  and  re- 
ceive payments  in  other  than  the  legal  money  cannot,  in  the 
absence  of  an  express  agreement  between  the  parties,  affect 
the  rule  of  law ;  and  evidence  of  such  a  custom  is  imperti- 
nent.^ But  if  the  bank  specially  agrees  only  to  make  payment 
in  something  pise  than  legal  tender,  whether  of  greater  or  of 
less  value,  such  a  contract  between  the  bank  and  the  depositor 
may  be  binding.^ 

See  also  title  "  Special  Deposit." 

§  313.  Verbal  Order.  —  The  order  is  almost  always  ex- 
pressed in  writing,  by  check  or  otherwise.  But  there  is  no 
absolute  necessity  for  this.  A  verbal  direction  from  the  cus- 
tomer to  the  bank  to  pay  a  sum,  or  to  transfer  a  credit,  would 
fully  justify  the  bank  in  so  doing.  If  the  bank  itself  is  willing 
to  act  upon  a  verbal  order,  this  would  be  a  perfect  defence  to 
a  suit  by  the  depositor  for  the  amount  transferred  under  it. 
But  though  the  bank  may,  if  it  choose,  act  upon  such  direc- 
tions, it  is  under  no  obligation  to  do  so ;  by  the  usages  of  the 
banking  business  it  is  entitled  to  demand  some  written  evi- 
dence of  the  order.i 

§  314.    Payment  without  Order    from    the    Depositor.  —  The 
agent  of  H.  deposited  in  the  P.  Bank  money  of  H.,  without 
the  knowledge  of  the  latter,  writing  in  the  bank   payment  to 
register  "  N.  H.  by  S.  A.  P.  "     The  bank  issued  a   "sent, 
certificate  payable  to  N.  H.,  and  afterwards  paid  the  money  to 

6  Nelligan  v.  Citizens'  Bank  of  Louisiana,  21  La.  An.  332. 

6  Foster  v.  Bauk  of  New  Orleans,  id.  338. 

'  See  cases  from  Illinois  Reports,  above  cited;  Thompson  v.  Riggs, 
5  Wall.  G63. 

8  Thompson  v.  Riggs,  5  Wall.  663. 

1  §313.  Watts  V.  Christie,  11  Beav.  546;  Coffin  r.  Henshaw,  10  Ind. 
277;  Walker  v.  Rostron,  9  M.  &  W.  421;  McEwen  v.  Davis,  39  lud.  111. 

537 


§  316  PAYMENT   OF   DEPOSIT. 

One  who  the  agent  on  his  indorsement  of  the  certificate 
agent  may  "  N-  H.  bv  S.  A.  P."  H.  ratified  the  dcposit,  and 
tfo'dtv'to""  ^"^^  *^^®  ^^"'^  ^^^'  *^^  amount.  Held,  that  the 
draw."  bank  had  no  right  to  assume  that  N.  H.  was  a  fic- 

titious principal,  and  that,  as  the  agent  had  no  authority  to 
draw,  the  bank  must  reimburse  H.,  and  tliat  the  full  amount 
shown  on  two  certificates  of  deposit  could  be  recovered, 
although  tlic  money  drawn  by  the  agent  on  the  first  may  liave 
been  used  to  buy  the  second.^  McFarland  and  Faterson,  JJ,, 
dissenting. 

§  315,  Order  may  be  for  Part  of  the  Deposit.  —  Bona  fide  in 
the  regular  course  of  business,  and  not  for  mere  vexation  of 
the  bank,  the  customer  may  draw  out  his  funds  in  such  par- 
cels as  he  may  see  fit,  both  as  regards  number  and  amount. 
The  rule  of  law  forbidding  a  creditor  to  split  up  his  demand 
does  not  affect  this  principle,  which  is  based  upon  a  custom 
of  the  banking  business  that  has  been  well  said  to  be  so 
ancient,  unquestioned,  and  well  known  that  courts  will  take 
judicial  notice  of  it,  without  proof.^  But  in  the  case  cited  of 
Chicago  Ins.  Co.  v.  Stanford,  the  court  said,  that  if  there  should 
be  a  dispute  between  the  bank  and  the  customer,  and  the 
latter  should  draw  a  multitude  of  checks,  not  in  the  ordinary 
course  of  bona  fide  business,  but  for  the  purpose  of  vexation  and 
of  bringing  a  proportionate  number  of  suits  against  the  bank, 
then  the  court  would  apply  itself  to  find  some  remedy.  In 
England  it  was,  until  lately,  contrary  to  law  to  draw  a  check 
for  less  than  20.s. ;  but  by  a  recent  statute  a  check  for  any 
sum  may  be  legally  drawn,  if  it  be  bona  fide  against  funds  of 
the  drawer  actually  in  the  hands  of  the  banker.  In  our  own 
country  the  law  sets  no  limit  whatsoever,  and  annexes  no 
conditions. 

§  31 G.  Payments  on  Void  Paper.  —  If  obligations  isSUCd  by 
a  depositor  have  been  declared  void,  the  bank,  knowing  this, 
must  not  pay  them. 

A  bank  "  could  not  become  the  depositary  of  the  collected 

1  §  31t.    Honig  V.  Pacific  Bank,  15  Pacific  Rep.  58  (Cal.). 
»  §  315.    Munn  i;.  Burch,  25  111.  3.5;  Chicago  Ins.  Co.  v.  Stanford,  28 
id.  168;  Byles  on  Bills,  *21,  Sharswood's  note  (Sharswood's  ed.). 

538 


VOID    PAPER.  §  317 

taxes  of  the  people  for  a  valid  and  lei^al  purpose,  and,  with 
full  knowlod2:e  of  the  illegal  and  void  character  of  the  bonds, 
which  had  been  over-issued,  permit  the  money  in  its  possession 
to  be  misapropriatcd  to  the  dischari^e  of  those  bonds.  To 
sanction  such  a  principle  would  allow  every  trustee  of  moneys 
to  account  for  them  by  the  known  misconduct  of  others,  and 
release  him  from  his  duty  to  see  that  the  trust  fund  under 
his  control  is  not  diverted  from  the  trust  with  his  knowledge 
and  consent."  ^ 

If  an  obligation  that  would  be  void  in  the  hands  of  a  bona 
fide  holder  for  value  without  notice  (as  if  signed  under  duress, 
or  by  an  infant)  is  paid  by  the  bank  without  notice,  it  is  in  the 
same  position  as  such  a  holder ;  indeed  it  is  just  such  a  holder 
itself,  and  cannot  charge  the  deposit  with  the  payment  if  the 
paper  is  repudiated  by  the  obligor.  But  if  an  obligation  is  a 
corporate  one  and  merely  ultra  vires  by  circumstance  un- 
known to  the  bank,  it  will  have  a  right  to  charge  the  corpora- 
tion with  the  payment. 

§  317.   Bank's  Duty  as  to  Trust  Fund.  —  The  banker  can- 
not excuse  his  disobedience  of  his  customer's  orders,  in  the 
due  course  of  business,  by  setting  up  that  he  knew,   Ranker  can- 
or  had  reason  to  believe,  that  the  customer's  or-   j""tVth1rd^ 
der  was  given  in  promotion  of  an  unlawful  pur-  ^^^i^fg^'^j^^/^" 
pose.     For  example,  the  banker  is  not  justified  in   refuse  to  pay 
refusing  to  honor  the  depositor's  check  because  he   merely  be- 
knows  or  believes  that  the  check  is  an  appropria-   aware  oVan 
tion  of  funds  to  a  person  or  for  a  purpose  to  whom   b"each^of 
or  for  which  the  depositor  is  not  lawfully  author-   t''"st. 
ized  to  appropriate  these  funds.^ 

"Supposing  that  the  banker  becomes  incidentally  aware 
that  the  customer,  being  in  a  fiduciary  or  a  representative 
capacity,  meditates  a  breach  of  trust,  and  draws  a  check  for 
that  purpose,  the  banker,  not  being  interested  in  the  transac- 
tion, has  no  right  to  refuse  the  payment  of  the  check,  for  if  he 
did  so  he  would  be  making  himself  a  party  to  an  inquiry  as  be- 
tween his  customer  and  a  third  person.''^ 

1  §  316.    Howard  v.  Deposit  Bank,  80  Ky.  496. 

1  §  317.    Gray  v.  Johnston,  L.  R.  3  H.  L.  Cas.  14.  per  Lord  Westbury. 

539 


§  317  PAYMENT    OF    DEPOSIT. 

But  if  the  depositor  seeks  to  pay  his  own  debt  to  the 
banker  by  an  appropriation  of  funds  to  his  credit  in  a  fidu- 
But  must  not  ciary  capacity  with  the  banker,  then  the  banker  is 
p?oii'ts'of"^ '"  affected  with  knowledge  of  the  unlawful  character 
suciiwronp:.  f)f  f\^Q.  n])propriation,  and  would  be  compelled  to 
refund. 2 

Where  A.  receives  what  he  knows  to  be  an  asset  of  the 
estate  or  trust  from  an  executor  or  trustee,  with  actual  knowl- 
edge derived  from  the  trustee  of  his  intention  to  use  the 
proceeds  for  his  own  i)rivate  wants,  or  derived  from  facts 
as  convincing  as  the  trustee's  declaration,  A.  will  be  com- 
pelled to  surrender  the  money  paid,  or  assets  pledged  to  or 
purchased  by  hini.^ 

But  this  principle  docs  not  touch  the  payment  of  checks 
properly  drawn,  even  though  the  bank  may  know  the  money 
is  drawn  with  intent  to  use  it  wrongfully,  unless  it  partici- 
pates in  misapplying  the  funds,  then  it  is  liable.^  Afortiorij 
it  does  not  require  a  bank  to  inquire  as  to  the  drawer's 
intent. 

"  The  circumstances  under  which  a  liability  like  that 
claimed  here  will  arise  against  the  banker  is  stated  in  Gray  v. 
Johnston ;  and  attention  is  there  called  to  an  important  ele- 
ment in  the  consideration  of  such  cases,  which  is,  that  a 
Bank  not  re-  banker  cannot  question  the  right  of  his  customer  hy 
br'each'of  refusing  to  honor  his  demands  hy  check  or  otherwise^ 
deposit)!-  uj>on  any  theory  that  it  is  the  banJcer''s  duty  to  look 
unless  it  par-   after  the  appropriation  of  the  triist  funds  ivhen  with- 

ticipates  in         •  i  r     r  ^  ^ 

the  protits.  drawn  from  the  bank,  and  to  protect  the  trust  by 
setting  up  a  jus  tertii  against  the  demand.  This  case  goes 
further  than  any  I  have  found,  in  some  of  its  expressions,  to 
justify  the  contention  that  mere  knowledge  of  the  banker  that 
a  breach  of  trust  is  intended  makes  him  privy  to  it  and  lia- 

2  Gray  v.  Johnston,  L.  R.  3  II.  L.  Cas.  14;  Lund  v.  Seamen's  Bank, 
37  Barb.  129. 

8  Duncan  v.  Jaudon,  1.5  Wall.  1G5;  Colt  v.  Lasnier,  9  Cow.  320;  Smith 
V.  Ayer,  101  U.  S.  320;  McLeod  v.  Drunimond,  17  Ves.  Jr.  153;  Shaw  v. 
Spenser,  100  Mass.  382. 

*  Bank  v.  Clapp,  76  N.  C.  482. 
540 


bank's  duty  as  to  trust  funds.  §  317 

ble.  But  on  scrutinizing  the  cases  cited  it  will  he  found  that 
participation  in  the  profits  of  the  fraud  is,  generally  speaking, 
an  element  in  the  case ;  and  a  mere  reason  to  believe  that 
the  trustees  were  misapplying  the  assets  will  not  make  the 
banker  liable  ;  for  this  would  be  to  make  ever!/  trustee  ac- 
countable for  his  conduct  in  the  trust  to  every  agent  whom 
he  happened  to  employ,  and  would  carry  the  principle  of 
constructive  trust  to  an  inconvenient,  and  indeed  to  an  im- 
practicable length."  ^ 

When  a  depositor  has  a  private  and  a  public  account,  be- 
ing not  only  a  public  officer  but  an  executor,  and  having  an 
individual  account,  the  law  will  not  charge  the  bank  with 
knowledge  of  the  depositor's  fraud,  nor  impose  on  it  the  duty 
of  inquiry,  merely  because  he  has  drawn  on  the  treasurer's 
account  checks  payable  to  himself  or  to  bearer,  or  has  trans- 
ferred money  from  one  account  to  another.^  The  bank  is  not 
bound  to  read  the  purpose  of  the  drawer  between  the  lines  of 
the  check. 

A  bank  must  honor  the  checks  of  its  depositor  drawn  in 
proper  form,  without  regard  to  the  use  the  depositor  is  going 
to  make  of  the  fund  ;  the  only  limitation  is  that  the  bank  must 
not  itself  participate  in  the  profits  of  the  fraud.^ 

(a)  If  a  bank  participates  in  the  misapplication  of  trust 
money  it  is  liable ;  as  where  money  deposited  by  A.  in  his 
own  name  and  known  by  the  bank  to  belong  to  another  was 
applied  by  A.  to  pay  his  debt  to  the  bank,  it  was  held  liable 
to  the  principal.^ 

A  bank  without  inquiry  discounted  notes  drawn  by  a  town 
treasurer  in  his  official  capacity  without  authority.  The 
proceeds  were  placed  to  his  credit  as  treasurer,  and  town 
money  was  from  time  to  time  deposited  on  the  account,  and 
he  drew  checks  against  the  funds  as  treasurer  and  used  the 

5  Walker  v.  Manhattan  Bank,  25  Fed.  Rep.  255. 

^  Goodwin  v.  American  National  Bank,  48  Conn.  550  (1881);  Central 
National  Bank  v.  Conn.  Mut.  Life  Ins.  Co.,  104  U.  S.  54. 

'  Walker  v.  Manhattan  Bank,  25  Fed.  Kep.  255 ;  Keane  v.  Robarts, 
4  Madd.  332,  357. 

^  Commercial  Bank  v.  Jones,  18  Tex.  811. 

541 


5  OZU  PAYMENT    OF    DEPOSIT. 

money  for  private  purposes.  Held  tliat  the  bank  could  not 
plead  against  the  town's  demand  for  its  money  so  squandered, 
that  it  supposed  the  treasurer  had  authority  to  draw  the  notes. 
They  must  be  considered  personal  loans  to  the  depositor ;  and 
when  he  drew  out  money  really  belonging  to  the  town  to  pay 
these  notes,  he  did  what  the  bank  must  be  held  to  know  he 
had  no  right  to  do,  and  it  must  refund  the  town.^ 

But  advancing  money  to  a  trustee  and  then  allowing  him 
to  ])ay  the  loan  by  the  proceeds  of  trust  property  he  has  a 
right  to  sell,  does  not  necessarily  make  the  bank  responsible, 
no  circumstances  being  shown  sufTicient  to  put  the  bank  on 
inquiry  as  to  whether  the  money  advanced  was  to  be  used  for 
trust  purposes  or  not.^^ 

A  bank  is  not  bound  to  inquire  into  the  propriety  of  any 
transfer  between  the  account  of  an  individual  partner  and  the 
partnership  fund.  It  must  honor  the  check  of  any  partner 
drawn  against  the  firm  deposit.^^ 

§  318.  Forced  Payment.  —  If  a  bank  has  been  forced  to  pay 
by  an  authority  it  could  not  question  or  resist,  it  will  not 
have  to  repay  the  deposit  to  the  depositor.^ 

§  319.  Insanity  of  Depositor. — If  the  bank  pays  in  good 
faith,  nut  knowing  of  the  insanity  of  the  depositor,  it  will  be 
protected.^ 

An  agent's  authority  is  not  revoked  by  lunacy  of  his  princi- 
pal until  this  is  judicially  ascertained,  and  the  bank  may  pay 
the  agent  till  then.^ 

§  320.  Succession  of  Banks.  —  Where  an  insolvent  bank 
transfers  its  assets,  name,  and  franchise  to  another  corporation, 
the  latter  is  responsible  to  the  creditors  of  the  former.^ 

A  savings  bank  succeeding  to  the  business  of  another  must 
pay  the  certificates  of  deposit  of  the  latter,^  and  always  where 

'  Town  of  East  Hartford  v.  American  National  Bank,  49  Conn.  539. 
"  Loring  v.  Brodie,  134  Mass.  409. 
"  Backhouse  v.  Charlton,  8  Ch.  D.  444  (1878). 
1  §  318.    Grivot  v.  Louisiana  State  Bank,  24  La.  An.  2G5. 

1  §  319.    Riley  v.  Albany  Savings  Bank,  30  Hun,  513. 

2  Wallis  V.  Manhattan  Co.,  2  Hall,  495. 

1  §  320.    Island  City  Savings  Bank  v.  Sachtleben,  3  S.  W.  733  (Tex.). 
^  Citizens'  Savings  Bank  i'.  Blakesley,  42  Ohio  St.  645. 
542 


PAYMENT   OF    DEPOSIT.  §  320 

the  })usincss  and  funds  of  bank  A.  pass  to  bank  B.,  B.  is 
liable  fully  to  the  depositors  of  A.^  in  the  absence  of  agree- 
ment of  the  depositors  to  the  contrary. 

When  a  bank  accepts  an  assignment  of  all  the  assets  and 
liabilities  of  another  bank,  and  credits  on  its  books  the  amount 
of  a  depositor's  (D.)  credit  on  the  books  of  the  assignor  bank, 
D.  becomes  a  depositor  with  the  assignee  bank,  and  his  claim 
cannot  be  barred  by  the  Statute  of  Limitations.^ 

«  Eans  V.  Exchange  Bank,  79  Mo.  182;  Hopper  v.  Moore,  42  Iowa,  563. 
4  Green  v.  Odd  Fellows'  Bank,  65  Cal.  71. 

543 


CHAPTER   XXL 

STATUTE    OF   LIMITATIONS. 

§  321.   Analysis.    See  §  301. 

Does  not  run  against  a  treneral  deposit  until  a  right  of  action  ac- 
§  322.  crues,  wliicli  is  not  until  dt'inand  is  made  upon  the  banlc,  —  it  being 

a  part  of  the  contract  of  deposit  Implied  by  the  uniform  course  of 
business  that  the  bank  is  in  no  default  in  not  seeking  the  creditor, 
but  may  hold  the  deposit  until  he  demands  it,  (unless  the  bank  ob- 
tained the  money  by  fraud,  §  322  e,)  or  circumstances  arise  making 
such  demand  useless,  as, 

(1)  Suspension  of  payment  by  the  bank, 
(e)    (2)  Notice  by  an  account  stated,  or  otlierwisc,  that  the  bank 

holds  adversely,  and  will  not  pay. 
But  when  one  bank  succeeds  to  the  business  and  assets  of  another, 
the  transfer  does  not  set  the  statute  running  against  the  depositors 
in  the  expired  bank.     §  320. 
Some  slight  opposition  lias  been  manifested  to  this  view,  but  the  over- 
whelming weight  of  authority,  direct  and  by  analogy,  favors  it. 

(c)  (1)  As  to  siiocial  deposit,  the  same  rule  liolds. 

(d)  (2)  As  to  proceeds  of  collection,  the  same  rule  holds. 

§  322.  Statute  of  Limitations.  —  Suit  by  Depositor  for  his 
Balance.  —  Tlic  indebtedness  of  the  banker  being  an  ordinary- 
indebtedness  at  common  law,  the  Statute  of  Limitations  will 
run  against  it,  as  against  any  other  simple  debt.  But  when 
the  statute  will  begin  to  run  has  not  been  as  yet  conclusively 
settled.  In  Union  Bank  v.  Knapp,^  it  was  said  that  the  stat- 
ute would  begin  to  run  from  the  date  of  the  last  balancing 
of  accounts,  as  in  the  depositor's  bank-book,  if  no  subsc(iuent 
transactions  should  be  had  between  the  parties.  This  is 
the  strict  corollary  from  the  rule  thiit  the  bank's  liability 
to  the  depositor  is  a  simple  debt.  But  there  is  certainly 
room  to  argue  that  this  calculation,  from  the  date  of  the 

^  §322.  3  Pick.  96;  Grant  on  Bankers,  &c.,  p.  4.  See  also  Pott  v. 
Clegg,  IG  IMee.  &  W.  321;  Bridgnian  j;.  Gill,  24  Beav.  302. 

544 


RUNS   ONLY   WHEN   THE   RIGHT   OF    ACTION    ACCRUES.        §  322 

last  transaction  between  the  parties,  is  not  founded  either 
in  reason  or  in  sound  law.  Viewing  it  practically,  Retention  is 
the  longer  the  bank  retains  the  money  undisturbed,  etit  (,f  the 
the  better  it  is  for  the  bank.  If  it  has  been  al-  Ql"i.reif 
lowed  to  reap  extraordinary  gains  from  the  funds  apJ,y"fo  aT 
of  a  customer,  because  it  has  been  allowed  to  re-  debtors. 
tain  them  undisturbed  for  the  unwonted  space  of  eight,  ten, 
or  twelve  years,  this  would  seem  to  be  no  just  cause  for  allow- 
ing it  to  add  the  still  more  enormous  gain  of  a  complete  appro- 
priation of  the  whole  sum.  If  the  business  of  the  institution 
or  firm  is  properly  conducted,  the  depositor's  balance  will 
remain  for  any  period  as  an  open  and  live  credit  on  the 
books  of  the  bank  ;  and  tlierefore  the  depositor's  draft  for 
his  principal,  or  any  part  of  it,  could  never  operate  as  an 
injurious  surprise,  as  a  like  demand  might  do  between  in- 
dividuals under  ordinary  circumstances.  Such  seems  clearly 
to  be  the  fair  reason  of  the  matter.  The  legal  arguments 
and  authorities  which  sustain  it  seem  scarcely  less  than 
conclusive. 

Tlie  rule  of  the  case  above  cited  can  be  based  only  on  the 
assumption  that  the  contract  is  a  perfectly  simple  one  of  un- 
qualified  indebtedness.     But  this  is  not  so.     We   it  is  clear 
have  already  seen  that  it  is  a  contract  specially   yn^^d  h  an 
modified  by  the  clear  legal  understanding  that  the   Jan^oHhe 
money   shall   be   forthcoming   to   meet   the   order   contract. 
of  the  creditor  whenever  that  order  shall   be  properly  pre- 
sented for  payment.     It  follows,  therefore,  that  this  demand 
for  payment  is  an  integral  and  essential  part  of  the  under- 
taking, and,  it  may  be  said,  even  of  the  debt  itself.     In  short, 
the  agreement  of   the  bank  with  the  depositor,  as  distinct 
and  valid  as  if  written  and  executed  under  the  seal  of  each 
of   the   parties,  is  only  to  pay  upon  t^emawc? ;  accordingly, 
until   there   lias  been  such   demand,  and  a  refusal   thereto, 
or  until  some   act   of  the  depositor,  or  some   act   No  action 
of   the   bank   made   known   to   the  depositor,  has   mand'or 
dispensed  with  such  demand  and  refusal,  the  stat-  ^'isppn^^jn^ 
ute  ought  not  to  begin  to  run,  nor  should  any  pre-   ^''''^  't- 
sumption  of  payment  be  allowed  to  arise. 

VOL.  I.  35  545 


§  322  STATUTE   OF   LIMITATIONS. 

(a)    Decisions  fully  sustain  these  views. 

In  Minnesota*-  and  Illinois  =^  demand  is  a  prerequisite  to 
the  maintenance  of  an  action  for  a  general  deposit  unless 
circumstances  exist  amounting  to  a  legal  excuse,  and  the 
statute  runs  only  from  demand.  In  New  York,  Pennsylvania, 
Maryland,  and  California  the  law  is  the  same.  The  under- 
taking of  the  bank  is  not  to  pay  immediately  and  absolutely, 
])ut  when  payment  shall  be  required.  It  is  in  no  default  till 
payment  is  demanded.  Therefore  no  right  of  action  exists, 
and  the  statute  does  ^ot  run  until  demand  is  made  as  stipu- 
lated for  in  the  implied  contract  of  deposit.^ 

(6)  Analogies  of  the  law  favor  this  view.  The  statute 
runs  in  favor  of  an  indorser  of  a  demand  note  only  from  the 
Demand  ob-  time  of  demand  and  notice,  however  long  the  de- 
ligatioiis.        mand  may  be  postponed.'^ 

(c)  So  in  case  of  a  contract  to  return  securities  left  with 
a  bank  for  safe  keeping,  the  statute  runs  against  the  right 
of  action  for  breach  of  the  contract  only  from  the  time  of 
demand,  and  not  from  the  time  of  conversion.^  If  the  action 
were  for  conversion,  the  rule  would  be  otherwise ;  no  demand 
is  necessary  to  maintain  trover  when  the  bank  treats  a  special 
deposit  as  part  of  its  assets." 

(cZ)  Where  a  deposit  of  money  is  made  in  bank,  the  Stat- 
ute of  Limitations  does  not  begin  to  run  until  after  demand 
is  made.     So  where  a  note  as  collateral  security  to  a  line  of 

2  Branch  v.  Dawson,  33  Minn.  399  (1885). 

8  Brahm  v.  Adkins,  77  111.  263. 

*  Dowues  V.  Phoenix  Bank,  G  Hill,  297;  Adams  v.  Orange  Co.  Bank, 
17  Wend.  514;  Gh-ard  Bank  v.  Bank  of  Penn  Township,  39  Pa.  St. 
92;  Planters'  Bank  v.  Farmers'  &  Mechanics'  Bank,  8  Gill  &  J.  449; 
Farmers  &  Mechanics'  Bank  v.  Planters'  Bank,  10  id.  422  (decision 
based  on  banking  usage);  McGough  v.  Jairaison,  107  Pa.  St.  336;  Bank 
V.  Merchants'  National  Bank,  91  N.  Y.  106  ;  Thompson  v.  Bank,  82  N.  Y. 
1 ;  Finkbones's  Appeal,  86  Pa.  St.  368  ;  Humphrey  v.  County  National 
Bunk,  113  Pa.  St.  417;  Green  v.  Odd  Fellows'  Bank,  65  Cal.  71  (1884); 
Mitchell  V.  Beekman,  04  Cal.  117. 

5  Parker  v.  Stroud,  98  N.  Y.  379. 

6  Ganley  v.  Troy  City  National  Bank,  98  N.  Y.  487. 

''  First  National  Bank  of  Monmouth  v.  Dunbar,  19  111.  App.  558 
(1886). 

646 


IN  GENERAL  RUNS  FROM  DEMAND.         §  322 

discounts  is  deposited  in  bank,  and  it  is  converted   Proceeds  of 
into  money  by  the   bank,  the   Statute   of   Limita-   collateral. 
tions  does  not  bei^in  to  run  as  to  the  proceeds  of  the  note 
until  after  demand. 

In  such  a  case  in  Pennsylvania  the  court  said :  "  It  is  a  set- 
-:led  rule  of  law,  that  when  a  deposit  is  made  in  a  bank  the 
statute  does  not  begin  to  run  until  after  demand  is  made. 
It  is  true,  the  defendant  was  not  technically  a  depositor  of 
money  to  be  drawn  out  on  his  check,  but  we  are  unable  to 
see  any  substantial  difference  between  such  case  and  the  one 
in  hand.  He  was  a  customer  or  dealer  with  the  bank,  was 
having  a  line  of  discounts,  and  the  notes  in  controversy  were 
deposited  as  collateral  to  such  discounts.  What  was  the 
duty  of  the  bank  when  the  collateral  notes  were  paid  ?  It 
was  to  deposit  or  carry  the  proceeds  to  the  credit  of  the 
defendant's  account.  He  would  then  occupy  the  position  of 
any  other  depositor."  ^ 

(g)    Further,  in  the  case  of  a  naked  debt,  the  statute  never 
begins  to  run  before  a  right  of  action  on  behalf  of  the  claim- 
ant or  creditor  has  accrued.     If  this  be  a  sound    ^^^^^^^ 
principle,  it  is  conclusive  of  the  present  question,   neverruns 
For  debt  though  it  be  of  the  bank  to  the  depositor,   of  action 
it  is  not  such  a  naked  debt  that  it  can  he  sued  upon 
by  the  depositor  at  any  moment.     The  authorities  are  numer- 
ous and  overwhelming  that  the  depositor's  right  of  action  does 
not  come  into  existence  until  after  he  has  made  a  demand 
upon  the  bank,  which  there  was  an  implied  and  valid  under- 
standing between  them  in  the  outset  that  he  should  make,^ 
or  until  some  act  of  the  bank  has  waived  such  demand.^*^ 
The  duties  of  demand  and  of  payment  are  reciprocal.     Surely 

8  Humphrey  v.  County  National  Bank,  113  Pa.  St.  417,  421. 

8  Downes  v.  Phoenix  Bank,  6  Hill,  297 ;  Adams  v.  Orange  Co.  Bank, 
17  Wend.  514;  Johnson  v.  Farmers'  Bank,  1  Harr.  117;  Girard  Bank 
V.  Bank  of  Penn  Township,  .39  Pa.  St.  92;  Union  Bank  v.  Planters' 
bank,  9  Gill  &  J.  439;  Watson  v.  Phoenix  Bank,  8  Met.  217;  Bellows 
Falls  Bank  v.  Rutland  County  Bank,  40  Vt.  377. 

10  Farmers  &  Mechanics'  Bank  v.  Planters'  Bank,  10  Gill  &  J.  422; 
Planters'  Bank  v.  Farmers  &  Mechanics'  Bank,  8  id.  449;  Bank  of  Mis- 
souri i;.  Benoist,  10  Mo.  519 ;  Cooper  v.  IMowry,  16  Mass.  7. 

547 


§  322  STATUTE   OF   LIMITATIONS. 

then  the  legal  results  of  these  rights  should  be  reciprocal 
likewise.  If  the  depositor  cannot  sue  till  he  has  demanded 
payment,  e  converso  he  should  not  lose  his  right  to  sue  till  the 
payment  has  been  refused  ;  for  until  that  time  he  has  a  right 
to  suppose  that  the  original  agi-eemcnt  between  himself  and 
the  bank,  which  was  entered  into  for  their  mutual  advantage 
and  ijrofit,  and  from  which  his  refraining  from  demand  is 
enabling  the  bank  to  reap  an  unusually  great  advantage  and 
large  profit,  is  still  subsisting  in  unbroken  force. 

The  acts  which  have  been  held  to  waive  demand  by  the 
depositor  are:  1.  Notification  to  him  by  the  bank  that  his 
Waiver  of  claiui  will  not  be  paid."  2.  The  rendition  to  him 
demand.  ^y  ^^q  ^^nk  of  an  account,  in  which  it  claims 
the  money  as  its  own.^^  3.  Suspension  of  specie  payment 
and  discontinuance  of  banking  operations  by  the  bank,  with 
knowledge  thereof  by  the  depositor.^^  4,  Suspension  of  pay- 
ment and  closing  the  doors  of  the  bank.^* 

In  Adams  v.  Orange  County  Bank,^^  the  publication  of  a 
list  of  unclaimed  deposits,  made  under  the  State  statute 
Newacknowi-  requiring  such  publication  at  certain  intervals, 
edgment.  ^^^  j^g^^j  ^q  j^q  ^u  acknowledgment  of  indebtedness 
to  the  depositors  therein  named,  from  which  a  new  promise 
could  be  implied  to  prevent  the  running  of  the  Statute  of 
Limitations ;  and  the  court  added,  that  it  would  seem  that, 
if  facts  existed  excusing  payment,  they  should  be  noticed 
in  such  publication,  or  otherwise  should  be  deemed  to  have 
been  waived. 

If  the  bank  has  obtained  the  money  by  fraud,  or  through 
an  illegal  contract,  suit  by  the  depositor  lies  at  once,  with- 
No  demand  out  demand.  So  where  money  was  paid  in  and 
the  bani?'ob-  ^  rcccipt  taken  from  the  cashier,  stipulating  that 
tained  the       pavmcnt  should  not  be  made  before  a  certain  day, 

monev  by  *     •'  •  •    j. 

fraud".  thus   in   fact   transmuting   the  transaction  into  a 

11  Farmers  &  Mechanics'  Bank  v.  Tlanters'  Bank,  uhi  supra. 

12  Bank  of  Missouri  v.  Benoist,  uhi  supra. 

"  Planters'  Bank  v.  Farmers'  &  ]\Iechanics'  Bank,  uhi  supra. 
'■*  Cooper  V.  Mowry,  uhi  supra. 
'8  17  Wend.  514. 
648 


WHEN   DEMAND    IS   UNNECESSARY.  §  322 

loan  to  the  bank,  being  a  contract  which  in  this  instance 
the  cashier  had  not  power  to  enter  into  on  behalf  of  the 
corporation,  it  was  held  that,  since  the  contract  was  illegal 
and  the  bank  could  only  claim  to  withhold  the  money  from 
the  owner  by  virtue  of  this  illegal  contract,  it  should  not 
be  entitled  to  a  prior  demand,  but  the  owner  might  sue 
immediately.^*' 

"  White  V.  Franklin  Bank,  22  Pick.  181. 

549 


CHAPTER   XXII. 

LIEN     AND     SET-OFF. 

§  323.  Analysis.     See  Lien  on  shares.     §  097  et  seq. 
A  Lien 

Is  a  mere  right  of  the  bank  to  retain  in  its  possession  (though  in 
maritime  law  and  in  equity  liens  may  exist  independently  of  pos- 
session) property,  tlie  title  of  which  (absolute  or  special)  is,  or  in 
the  case  of  negotiable  paper  purports  to  be,  in  one  against  whom 
the  bank  has  some  demand,  until  that  demand  is  satisfied. 
Liens  are  particular  or  general. 
A  Particdlar  Lien 

Attaches  to  a  tiling  for  a  claim  growing  out  of  or  connected  with 
that  particular  thing,  and  is  favored  at  common  law  as  founded  in 
equity. 
A  General  Lien 

Is  a  right  of  retention,  not  only  for  charges  growing  out  of  or  con- 
nected with  that  particular  thing,  but  also  for  charges  in  respect 
to  all  dealings  between  the  parties  of  a  like  nature.     Such  liens 
are  not  favored. 
§  332.   Creation. 

Liens  arise  by  express  agreement,  or  from  the  course  of  business,  and 
never  exist  where  the  terms  of  agreement,  express  or  implied,  are 
inconsistent  with  the  lien. 
§  326.  Effect. 

A  lien  is  good  against  the  depositor,  whether  he  is  true  owner  of  the 

property  or  not.     §  (599. 
A  lien  upon  non-negotiable  property  is  good  against  the  whole  world, 
§  326.    if  the  debtor  is  the  true  owner  at  tlie  time  the  lien  arises.     Liens 
relate  back  to  the  beginning  of  possession,  unless  the  bank  has 
§  33L    notice  of  intervening  rights  before  parting  with  the  consideration 
that  creates  the  lien,  wherefore  an  attaching  creditor  or  a  pur- 
chaser from  the  debtor  takes  it  subject  to  the  liens  of  the  bank, 
arising  before  it  has  notice  of  the  purchase  or  service  of  the  at- 
tachment. 
§  324.  A  lien  on  negotiable  property  is  good  against  all  the  world,  if  the 

bank  takes  it  bona  Jide  for  value,  without  notice,  and  in  the  usual 
course  of  business. 
§  333.  In  New  York,  Tennsylvania,  &o.,  a  bank  having  possession  of  paper 

which  really  does  not  belong  to  its  debtor  has  no  lien  if  it  has  not 
changed  its  position  on  faitli  of  the  paper,  but  merely  holds  it 

650 


ANALYSIS.  §  323 

against  a  pre-existing  general  balance.    But  in  most  States,  a  pre- 
existing debt  is  a  sufficient  consideration  to  constitute  the  bank  a 
holder  for  value  in  tlie  usual  course  of  business.     The  New  York 
exception  is  not  recognized. 
On  what  and  for  what  the  Lien  attaches. 
§  324.  A  bank  has  a  general  lien  upon  all  moneys  and  negotiable  securities 

of  the  depositor  in  its  hands,  in  the  regular  course  of  business, 
unless  there  is  an  agreement  to   the  contrary,  or  the  bank   has 
notice  of  facts  indicating  that  the  intent  of  the  depositor  in  making 
or  appropriating  the  deposit  is  inconsistent  with  such  lien. 
Under  this  principle,  a  bank  has  a  lien  for  its  general  balance  upon 

business  paper  placed  with  it  for  collection,  and 
On  the  proceeds  of  sucli  collections. 

On  goods,  bonds,  deeds,  &c.,  upon  the  faith  of  which  it  has  made 
advances,  it  has  a  particular  lien. 
§  324.    (c)  But  it  has  no  general  lien  on  securities  left  with  it  after  it  has 

refused  to  lend  money  on  them. 
§  325.  Nor  on  bills  left  to  be  exchanged. 

(a)      Or  on  the  surplus  proceeds  of  collaterals  sold. 
(b,  d)    Nor  on  any  moneys  deposited  for  a  special  purpose, 
(c)      Nor  on  a  special  deposit. 
§  326.  The  property  and  the  claim  that  is  the  basis  of  the  lien  must  be  due 

(c,  d)  to  and  from  the  same  funds.  (The  property  of  A.  cannot  be  held 
for  a  debt  due  fronj  A.  as  administrator  or  trustee,  or  from  the 
firm  to  which  A.  belongs,  nor  can  the  bank  keep  A.'s  property  for 
a  debt  due  from  A.,  unless  it  is  due  to  the  bank.) 
This  must  be  actually  true  in  case  the  property  is  non-negotiable ; 
but  in  case  of  negotiable  property,  the  bank  may  presume  that  it 
belongs  to  the  depositor,  unless  it  has  notice  to  the  contrary.  If 
the  bank  is  aware  that  the  property  is  not  that  of  the  depositor, 
it  can  only  hold  it  for  a  claim  against  him  who  is  really  entitled 
to  it,  and  not  against  a  third  person  whom  it  supposes  to  be  the 
owner. 
§  327.  Appropriation  of  deposits. 

(e)  If  there  are  several  accounts  in  different  branches  of  the  bank, 
or  in  the  same  branch,  which  are  really  kept  by  the  same 
depositor  in  the  same  right,  the  bank  may  apply  a  deposit  in 
any  one  to  satisfy  an  overdraft  on  any  other,  and  if  a  de- 
positor does  not  apply  his  deposit  himself,  the  bank  may 
(d)  appropriate  it,  even  to  a  claim  barred  by  the  Statute  of  Limi- 
tations. 
§  328.  Money  received  by  a  depositor  for  the  use  of  the  bank,  but  not  paid 

over,  may  be  charged  against  him  on  general  account,  and  in 
equity  the  bank  may  retain  a  deposit  for  an 
§  329.  Unmatured  debt, 

As  for  a  note  of  the  depositor,  if  there  is  otherwise  danger  of 
loss,  as  by  the  depositor's  insolvency,  though  at  law  there 
cannot  be  a  lien  or  set-off  of  a  future  debt  against  a  present 
demand,  except  by  agreement.     §  702. 

551 


§  323  lip:n  and  set-off. 

§  330.  Loss  of  lien. 

Lien  may  be  lost  by  taking  security  for  the  debt,  voluntarily 
parting  with  possession,  &c.     §  701. 
§  331  Estoppel. 

The  bank  may,  by  bad  faith,  be  estopped  to  assert  a  lien  that 
would  ordinarily  exist, 
((j)  And  as  to  a  purfhaser,  a  bank  cannot  set  up  a  lien  for  advances 
made  after  it  knew  of  ilie  purchase. 
Set-off.     (See  Set-off  of  bank  bills,  S§  (>33,  639.) 

Is  a  defence  to  a  demand  by  setting  up  an  opposing  demand  to 
counterbalance  it  in  whole  or  in  part. 
§  334.  The  demands  must  be  run  between  the  same  two  real  funds. 

§  335.  They  must  be  certain,  or  capable  of  being  reduced  to  certainty,  by 

computation. 
(This  excludes  demands  for  damages,  the  amount  of  which  a  jury 
must  determine  by  their  own  estimate  and  opinion,  and  not  merely 
by  calculation,  in  case  they  deem  the  claim  a  good  one.) 
§  336.  The  demands  must  be  money  demands. 

Goods  intrusted  to  the  bank  for  any  purpose  but  to  be  turned  into 
a  money  credit  are  not  the  subject  of  set-off. 
§  336  a.       Certified  check  not  subject  to  set-off  by  bank. 
§  337.    Insolvency, 

Of  depositor. 

The  bank  may  retain  his  deposit  to  satisfy,  so  far  as  it  will  go, 
his  indebtedness  to  it,  and  if  any  part  of  its  claims  arising  out 
of  contract  are  unliquidated,  (as  in  case  of  notes  on  which  the 
depositor  was  indorser  and  the  principals  are  insolvent,)  it  may 
keep  the  deposit  till  the  probable  debt  is  ascertained. 
§  338.  Of  a  commercial  bank. 

The  depositor  may  offset  his  deposit  or  other  debt  due  from  the 
bank  against  a  debt  due  from  him,  though  it  maturt>s  after 
the  insolvency. 
But  if  his  claim  against  the  bank  came  into  his  hands  after  the 
insolvency,  he  will  be  allowed  only  what  he  paid  for  it,  except 
under  statute  law. 
§  339.  Of  a  savings  bank. 

Depositor  cannot  offset  his  deposit  after  insolvency  of  the  bank. 
§  340.   Death  of  Depositor. 

The  bank  may  offset  against  his  representatives  just  as  against  him. 
Comparison  of  Lien  and  Set-off. 

(1)  Set-off  is  a  statute  creation  (except  in  equity),  while  liens  exist 

at  common  law. 

(2)  A  lien  at  common  law  requires  the  possession  by  the  bank,  actu- 

ally or  constructively,  of  the  property  of  another,  while  set-off 
has  nothing  to  do  with  the  possession  of  any  specific  property 
to  which  the  debtor  has  title. 

(3)  A  lien  gives  a  right  to  retain  specific  articles  of  property,  the  title 

to  which  is  not  in  the  rctainor,  while  set-off  can  never  give  a 
right  to  retain  property  owned  by  another. 

552 


ANALYSIS.  §  324 

(4)  It  ia  clear,  therefore,  that  the  word  "  lien  "  cannot  properly  be  used 
in  reference  to  the  claim  of  the  bank  upon  a  general  deposit,  for 
the  funds  on  general  deposit  are  the  property  of  the  bank  itself. 
The  term  "set-ofE"  sliould  be  applied  in  such  cases,  and  "hen" 
when  a  claim  against  paper  or  valuables  on  special  or  specific 
deposit  is  referred  to. 

In  the  cases,  the  words  are  used  very  loosely,  and  sometimes  the  true 
force  of  a  case  has  been  mistaken  by  te.xt-writers  through  failure 
to  keep  in  mind  this  distinction. 

The  practical  effect  of  lien  and  set-off  is  much  the  same.  They 
result  in  balancing  opposing  claims,  and  since  transfers  of  a  gen- 
eral deposit  are  subject  to  the  equities  between  the  bank  and  the 
depositor,  until  notice  to  the  bank,  its  right  of  set-off  is  as  good 
in  respect  to  a  general  deposit  as  its  lien  in  respect  to  a  specific 
deposit  for  collection  or  as  collateral. 

§  324.  On  what  the  Lien  attaches  and  for  what  Demands.  — 
The  rule  may  be  broadly  stated,  that  the  bank  has  a  general 
lien  on  all  moneys  and  funds  of  a  depositor  in  its  possession 
for  the  balance  of  the  general  account.^  Of  course,  so  long  as 
the  balance  is  in  favor  of  the  depositor,  the  lien  has  no  vitality 
in  it.  But  when  payment  upon  an  overdraft,  a  discount,  an 
acceptance,  or  other  species  of  advance  or  loan  by  the  bank  to 
him,  creates  an  indebtedness  on  his  part,  all  the  funds  which 
the  bank  has  or  obtains  to  his  credit  may  be  applied  upon 
such  indebtedness  until  it  is  fully  discharged. 

The  funds  thus  applicable  have  been  said  to  be  not  alone 
the  general  deposit  of  the  customer,  but  any  business  paper, 
as  notes  or  bills,  belonging  to  him  and  which  he  has  intrusted 
to  the  bank  for  collection.^ 

1  §324.  Ford  y.  Thornton,  3  Leigh,  695;  State  Bank  v.  Armstrong, 
4  Dev.  519;  McDowell  v.  Bank  of  AVilnaington,  1  Harr.  369;  Commer- 
cial Bank  of  Albany  v.  Hughes,  17  Wend.  94;  Dawson  v.  Real  Estate 
Bank,  5  Pike,  283;  Bank  of  United  States  v.  Macalester,  9  Barr,  475; 
Beckwith  v.  Union  Bank,  4  Sandf.  604;  Marsh  v.  Oneida  Bank,  34  Barb. 
298;  Davis  v.  Bowsher,  5  Term,  488;  Jourdaine  i'.  Lefevre,  1  Esp.  N.  P. 
66;  Bolton  v.  Puller,  1  B.  &  P.  539;  Giles  v.  Perkins,  9  East,  12;  Scott  ». 
Franklin,  15  East,  428;  Brandao  v.  Barnett,  12  CI.  &  F.  787;  Jones  r. 
Peppercorne,  5  Jur.  N.  s.  140;  28  L.  J.  Ch.  153;  In  re  Williams,  3 
It.  Eq.  346. 

2  Ex  parte  Pease,  1  Rose,  282;  Ex  parte  Wakefield  Bank,  1  id.  243; 
19  Yes.  Jr.  25;  but  see  Lord  Bolingbroke's  Case,  in  Joy  v.  Campbell, 
1  Sch.  &  Lef.  346. 

653 


§  325  LIEN    AND    SET-OFF. 

Upon  precisely  what  property  belonging  to  the  customer 
ill  the  possession  of  tlie  bunk  the  lien  will  attach,  is  a  subject 
upon  which  there  have  been  few  decisions  in  America.  In 
Alabama  it  is  held  that  a  bank  has  a  lien  upon  all  moneys 
and  securities  of  a  customer,  coming  into  its  possession  in  the 
regular  course  of  business,  for  any  balance  due  it  on  general 
account.^ 

(a)  A  bank  discounting  a  draft  on  faith  of  goods  shipped 
Discount  on  by  the  drawer  acquires  an  equitable  lien  on  the  pro- 
goods,  ceeds  of  the  goods.^ 

(6)  A  bank  holding  a  depositor's  demand  note  has  a  lien 
Proceeds  of  0^1  the  procccds  of  drafts,  though  collected  after  the 
collection.       i\\[u(t  of  a  petition  in  bankruptcy.^ 

(c)  A  bank  has  no  lien  for  a  general  balance  upon  secu- 
No  lien  on  ^'itics  accidentally  in  its  possession  or  not  in  its 
securities  in    posscssion  in  the   coursc   of   business   as   a  bank, 

bank  s  pos-       '■ 

session  acci-  for  example  securities  left  with  the  bank  after 
in  course  of  its  Tcfusal  to  discount  tlicm  or  lend  monev  on 
^'^''''''-        them.6 

§  325.  Specific  and  Special  Deposits.  —  Any  special  pur- 
pose attaching  to  the  deposit  inconsistent  with  a  general 
On  specific  lien  will  prevent  it,  as  giving  bills  to  a  banker  to 
lien^forKcn-  cxchangc  for  othcrs.^  So  where  securities  are 
ff  sucu'iTeT'  pledged  for  a  particular  loan  or  debt,  the  banker 
would  be  in-    j^rjg  j^q  \[qj^  qj^  thom  to  sccurc  payment  of  a  general 

consistent  ^     •'  ° 

with  the  pur-  balance,  or  of  other  demands  and  indebtedness.^ 
deposit.  So,  if  a  check  is  deposited  to  take  up  the  check  of 

"  Lehman  v.  Tallassee  Manuf.  Co.,  64  Ala.  567;  In  re  Tallassee  &  Co., 
64  Ala.  595. 

*  Flour  City  National  Bank  v.  Garfield,  30  Hun,  579. 

^  In  re  Farnsworth,  Brown,  &  Co.,  5  Biss.  223. 

^  Petrie  v.  Myers,  51  How.  Pr.  513;  Lucas  v.  Dorrien,  7  Taunt.  278; 
8.  c.  1  Moore,  29. 

1  §  325.    Barnett  i'.  Brandao,  12  Clark  &  Fin.  787,  805,  809. 

2  Wyckoff  V.  Anthony,  90  N.  Y.  442;  and  see  Davis  v.  Bowsher,  o 
Term,  491;  Duncan  v.  Brennan,  83  N.  Y.  487;  Robin.son  v.  Frost,  14 
Barb.  536;  Lane  v.  Bailey,  47  Barb.  395;  Woolley  v.  Louisville  Banking 
Co.,  87  Ky.  527  (1884);  Teutonia  National  Bank  of  New  Orleans  v.  Loeb, 
27  La.  An.  (1875). 

554 


NO    GENERAL   LIEN    ON    SPECIFIC   DEPOSITS.  §  325 

another  person,  the  bank  cannot  apply  it  to  satisfy  the  de- 
positor's debt  to  the  bank.^ 

(a)  And  if  a  bank  sells  collateral  security,  and  there  is 
a  surplus   of   proceeds    after   the   debt  secured  is   g^,   j^g 
paid,  the    surplus   cannot   be    applied    on   general   f'omsaieof 
balance.* 

(6)  In  Bank  of  United   States  v.  Macalcster  ^  the  general 
rule  was  laid  down  that  funds   deposited  in  a  bank  for  a 
special  purpose,  known  to  the  bank,  cannot  be  with-  no  general 
held  from  that  purpose,  to  the  end  that  they  may   J,'!;"  i/otic"  of 
be  set  off  by  the  bank  against  a  debt  due  to  it  from   ^^^^^  '"^o'\- 

''  "  sistent  with 

the  depositor.  Accordingly,  certain  coupons  of  the  if-  as  a  spe- 
State  bonds,  issued  by  the  State  of  Illinois,  having  in  the  de- 
been  made  payable  at  the  Bank  of  the  United  States,  ^°*' ' 
and  funds  to  precisely  the  amount  necessary  to  meet  these 
coupons  having  been  deposited  by  the  State  in  the  bank  just 
before  they  fell  due,  it  was  held  that  the  bank,  understand- 
ing the  purpose  of  the  deposit,  could  not  refuse  to  apply  the 
money  to  the  payment  of  the  coupons  on  the  ground  of  a  prior 
undischarged  indebtedness  of  the  State  to  the  bank.  The 
same  general  rule  is  laid  down  by  Grant  in  his  English 
Treatise,  p.  273.  He  says  that  the  claim  of  a  general  lien  by 
the  bank  would  be  inconsistent  with  its  special  undertaking. 
The  reasoning  in  the  above  case,  however,  and  that  in  Mr. 
Grant's  work,  both  tend  to  show,  though  it  is  not  directly 
stated,  that  if  the  deposit  were  so  made  that  the  bank  did  not, 
as  matter  of  fact,  know,  or  at  least  did  not  have  such  strong 
cause  that  it  could  not  reasonably  insist  that  it  did  not  know, 
that  the  deposit  was  intended  to  meet  the  special  purpose,  and 
that  it  could  not  therefore  be  subjected  to  the  lien,  then  the 
lien  might  attach.     For  if  the  bank  had  not  such  knowledge, 

'  Straus  V.  Tradesmen's  National  Bank,  36  Hun,  451;  National  Bank 
V.  Insurance  Co.,  104  U.  S.  54. 

*  Brown  v.  New  Bedford  Savings  Inst.,  137  Mass.  262;  WoLstenholm  v. 
Sheffield  Union  Banking  Co.,  54  Law  T.  R.  n.  s.  746;  Hathaway  v. 
Fall  River  National  Bank,  131  Mass.  14;  Appl.  of  Bank  of  Commerce, 
44  Pa.  St.  423. 

6  9  Barr,  475. 

555 


§  325  LIEN    AND   SET-OFF. 

or  amjtle  means  of  obtainiiiii:  such  knowledge,  it  may  well  be 
urged,  that,  with  an  unpaid  indebtedness  of  the  customer  to 
the  bank  already  subsisting,  it  would  refuse  to  have  further 
dealings  with  him,  if  they  were  to  be  of  such  a  qualified  and 
unusual  nature. 

Tlie  English  cases  eliminate  from  the  operation  of  the  lien 
all  property  which  comes  into  the  banker's  hands  plainly  ear- 
marked or  appropriated  for  any  special  purpose.  A  customer's 
security,  specilically  stated  to  be  for  the  amount  "  which  shall 
or  may  be  found  due  on  the  balance  of  his  account,"  was  held 
to  be  security  for  the  then  existing  balance  only,  and  not  to  be 
applicable  upon  the  subsequent  floating  balance.^  In  like 
manner,  a  security  specifically  given  for  a  contemporaneous 
advance  of  one  thousand  pounds  by  the  banker,  was  held  not 
to  be  applicable  against  an  independent  indebtedness  of  five 
hundred  pounds,  afterwards  arising  upon  the  ordinary  running 
account.' 

(c)  It  seems,  too,  that  the  deposit  should  be  made  with  the 
banker  in  his  character  as  such,  and  should  not  be  in  the  na- 
Specidde-  ture  of  a  special  deposit  for  a  particular  purpose 
posit.  j^Q^  connected  with  the   banking  business.     Thus, 

for  example,  a  chest  of  plate  confided  to  the  banker,  not 
as  a  banker  but  as  a  custodian,  merely  for  safe  custody  in  his 
vaults,  was  held  not  subject  to  the  licn.^ 

(rf)  Money  deposited  for  a  specific  purpose  must  be  applied 
to  that  and  no  other.  Where  a  State  had  two  deposits  in 
Specific  de-  a  bank,  one  to  pay  coupons  and  bonds  issued  by 
brapFopH-  the  canal  commissioners,  the  other  under  control 
atedtodebt    ^f  ^^q  f^T^^  commissioner,  the  latter  being  over- 

of  the  depos-  '  . 

itortobank.  drawn,  the  bank  applied  the  former  deposit  to  set- 
tle the  deficit.  Held,  that  this  could  not  be  done  by  the  bank ; 
it  was  the  agent  of  the  coupon  holders  to  the  extent  of  the  sum 
set  apart  for  their  payment.^ 

8  In  re  Medewe,  26  Beav.  588;  28  L.  J.  Ch.  891. 

7  Vanderzee  v.  Willis,  3  Bro.  C.  C.  21 ;  Zinck  v.  Walker,  2  W.  Bl.  1154. 

8  Ex  parte  Eyre,  1  Ph.  235;  Brandao  v.  Barnett,  12  CI.  &  F.  809; 
O'Connor  v.  Majoribanks,  4  Man.  &  G.  435. 

9  Judy  V.  Farmers  &  Traders'  Bank,  81  Mo,  404.  • 

556 


LIEN.  §  326 

§  326.  The  opposing  Claim  and  the  Property  must  be  due  to 
and  from  the  same  two  Funds.  —  The  licn  and  the  right  of 
set-off  only  exist  where  the  individual,  who  is  both  deposi- 
tor and  debtor,  stands  in  both  these  characters  in  precisely 
the  same  relation  and  on  precisely  the  same  footing  towards 
the  bank.  That  is  to  say,  for  instance,  the  bank  can  claim 
no  lien  on  the  deposit  of  a  partner,  made  on  his  separate 
account,  in  order  to  set  off  the  same  against  a  debt  owing 
them  from  the  firm  ;  ^  and  this  not  even  if  property  specifi- 
cally pledged  to  the  bank  by  the  partner  on  his  separate 
account  afterwards  becomes  the  property  of  the  firm.  Even 
then,  if  the  firm  fails,  the  banker  can  hold  the  property  thus 
pledged  solely  as  security  for  any  separate  indebtedness  of 
the  individual  partner.^  For  it  is  not  in  the  bank's  posses- 
sion as  the  property  of  the  firm ;  so  far  as  the  firm  is  con- 
cerned the  bank's  possession  is  accidental.  Neither  can  the 
individual  partner  and  the  firm  so  shift  their  respective 
credits  and  debits  as  to  set  them  off,  the  one  against  the 
other,  when  the  bank  itself  is  insolvent.^  In  like  manner, 
the  joint  and  several  note  of  A.  as  principal,  and  B.  and  C. 
as  sureties,  cannot  be  paid  out  of  the  individual  deposit  even 
of  A.*  In  the  first  of  the  three  cases  cited  in  this  paragraph, 
the  facts  were  these.  The  bankers  stopped  payment,  being 
at  the  time  indebted  to  A.,  but  having  a  balance  due  from 
the  firm  of  A.  and  B.  Before  they  had  actually  committed 
an  act  of  bankruptcy,  A.  assigned  his  credit  to  the  firm,  and 
notified  the  bankers.  But  it  was  held  that  the  assignment 
could  not  be  legally  made.  In  short,  it  may  be  laid  down 
as  a  general  rule,  based  upon  and  illustrated  by  many  of 
the  cases  cited  and  commented  upon  in  this  and  the  im- 
mediately preceding  paragraphs,  that,  if  a  customer  has  any 
duplex  relationship  with  his  banker,  the  line  of  demarcation 
shall  be  carefully  preserved.  If  he  borrows  a  specific  sum, 
and   gives   specific  security  for  it,  all  transactions  relating 

1  §  326.   Watts  V.  Christie,  11  Beav.  546. 

2  Ex  parte  McKenna,  30  L.  J.  Bank.  20. 

3  Watts  V.  Christie,  11  Beav.  546;  26  L.  J.  Ch.  711. 
*  Dawson  v.  Real  Estate  Bank,  5  Pike,  283. 

557 


§  32G  LIEN    AND    SET-OFF. 

thereto  shall  bo  kept  accurately  distinct  from  the  transactions 
growing  out  of  his  ordinary  connection  witii  the  bank,  as  a 
simple  depositor.^  \ 

(a)  If  the  same  person  keeps  separate  accounts  at  the 
same  bank  in  distinct  characters,  the  one  being  his  indi- 
Trustac-  vidual  accouut,  and  the  other  being  kept  by  him 
count.  under  any  species  of  trust,  if  the  bank  has  notice 
of  the  nature  of  this  second  account,  it  will  be  bound  to 
keep  the  two  distinct.  If  the  bank  wrongfully  permits  the 
depositor  to  intermingle  the  accounts,  or  to  make  transfers 
from  the  trust  account  to  his  personal  account,  when  in  fact 
he  had  no  right  so  to  do,  it  may  possibly  render  itself  liable 
to  reimburse  the  beneficiary  or  ])rincipal  who  has  been  un- 
justly stri{)pcd  of  his  property  ;  in  which  case,  if  the  cus- 
tomer has  drawn  against  his  own  account,  so  that  his  balance 
no  longer  furnishes  means  of  remuneration  to  the  bank, 
it  will  have  no  recourse  but  to  bear  the  loss.*'  The  decision 
in  tbis  case  was  based  upon  the  ground  that  the  bankers 
had  actual  cognizance  of  the  circumstances  which  rendered 
the  conduct  of  their  customer  fraudulent ;  and  so  were,  in 
the  view  of  the  law,  privy  to  the  fraud.  Where  the  circum- 
stances fail  to  show  real  or  implied  knowledge  of  this  de- 
scription on  the  part  of  the  bank,  the  reason  of  this  cause 
would  not  reach. 

(b)  Where  a  bank  knew  that  the  account  of  a  depositor 
was  opened  by  him  as  general  agent,  to  facilitate  his  business 
as  agent  of  an  insurance  company,  by  accumulating  premiums 
on  policies, — held  that  the  bank  was  chargeable  with  notice 
of  the  equitable  rights  of  the  company,  although  he  deposited 
other  money  in  the  same  account  and  drew  checks  upon  it 
for  his  private  use;  and  the  company  might  enforce  its 
beneficial  ownership  therein  against  the  bank,  claiming  a 
lien  thereon  for  a  debt  due  to  it  which  he  contracted  for 
his  individual  use." 

6  Mosse  V.  Salt,  32  Beav.  269;  32  L.  J.  Ch.  756. 
«  Bodenham  v.  Hoskins,  13  Eng.  L.  &  Eq.  222. 

T  Central  National  Bank  v.  Conn.  Mut.  Life  Ins.  Co.,  lOi  U.  S.  54 
(1881). 

558 


LIEN. 


326 


(c)  The  deposit  and  the  debt  must  be  due  to  and  from  the 
same  fund.  A  bank  cannot  keep  a  deposit  made  by  D.  as 
assignee,  for  D.'s  individual  debt.^ 

Where  an  agent  deposits  money  of  his  principal  in  his 
own  name  as  "  agent,"  the  bank  knowing  the  trust  character 
of  the  funds  cannot  appropriate  tlicm  to  the  in-  Funds  of 
dividual  debt  of  the  agent,  even  with  his  consent,  ^ppnSe"t'o 
to  the  prejudice  of  the  principal.^  So  where  funds  agent's  debt. 
are  deposited  in  the  name  of  "  J.  C.  W.,  Trustee,"  the  bank 
cannot  apply  them  to  a  debt  due  from  J.  C.  W?^ 

(tf)    A  bank  cannot  apply  the  funds  of  a  new  partnership 
to   settle   the  overdraft  of  the  old  firm  now  dis-   overdraft  of 
solved,  though  one  of  the  two  partners  in  the  old   "i'^^™- 
firm  continues  in  the  business.^^ 

(e)    A  firm  finding   itself   in  embarrassed  circumstances 
deposited  a  certain  sum  in  the  bank  with  which  it  was  ac- 
customed  to   do    business,   but   made   the  deposit   on  money 
in  the  name  of  the  book-keeper  of  the  firm.     The   pos^;,Tiontf 
sum  in  question  was  due  to  persons  for  whom  the   J;^;/,'"^;')^''" 
depositing  firm  acted  as  agents.     The  bank  had   ^"'{^^^^^^^g 
knowledge  that  the  deposit,  though  in  the  name   no 'lien  for 
of  the  book-keeper,  was  of  money  of  the  firm,  but   though  it 
did  not  know  that  it  was  of  money  which  the  firm   Jio,"fy  Vas^ 
had  received  in  the  course  of  an  agency.     It  was   ^•'*- 
held  that  the  bank  had  no  lien  on  this  deposit  for  indebted- 
ness of  the  firm  to  it.^^     In  order  to  apply  money  deposited 
in  A.'s  name  to  the  debt  of  B.,  the  bank  must  show  not  only 
that  it  is  not  A.'s  money,  but  that  it  is  actually  the  money 

of  B. 

(/)    Neither   shall   the   banker   have   his   lien  upon  non- 
negotiable  property  subject  to  a  trust,  and  improperly  left 
with  him  or  pledged  to  him  by  the  trustee,  though   Trastprop- 
the  bank  is  without  notice  of  the  trust ;    unless,   ^^^y- 

8  Lawrence  v.  Bank  of  Republic,  3.5  N.  Y.  320. 

9  Baker  v.  New  York  National  Exchange  Bank,  100  N.  Y.  31. 

10  Bundy  v.  Town  of  Monticello,  84  lud.  119  (1882). 

11  Richardson  v.  International  Bank,  11  111.  App.  582. 

12  Falkland  i-.  St.  Nicholas  National  Bank,  84  N.  Y.  145. 

559 


§  326  LIEN    AND    SET-OFF. 

indeed,  the  cestui  que  trust  shall  have  done  some  act  or 
been  guilty  of  some  negligence  such  as  to  deprive  him  of  his 
counter  rights.^^  And  a  deposit  in  the  name  of  A.  as  agent 
or  trustee,  or  in  the  name  of  A.  if  the  bank  has  notice  that  it 
belongs  to  another,  cannot  be  applied  by  the  bank  to  A.'s 
debt  to  itself,  nor  will  it  have  any  lien  on  a  fiduciary  deposit. 
If  the  trust  property  is  traceable  into  the  debt  now  due  from 
the  bank  to  the  depositor,  the  true  owner  can  claim  the  fund.^* 

((/)  But  if  the  trust  property  consists  of  bills  or  notes, 
payable  to  bearer,  or  other  property  transferable  by  delivery 
merely,  and  be  not  ear-marked  as  trust  property,  if  the  cus- 
tomer deposit  them  as  if  they  were  his  own,  and  the  banker 
receives  them  in  due  course,  bona  fide  and  with  no  notice 
of  the  trust,  he  shall  hold  them  under  his  lien.^^ 

In  the  case  of  money,  or  any  negotiable  securities,  it  has 
been  frequently  held  that  where  the  bank  has  no  notice 
that  they  do  not  belong  to  the  depositor,  it  acquires  a  valid 
lien  for  his  indebtedness.^*^  Though  it  has  been  held,  that, 
if  A.  delivers  promissory  notes  to  B.  to  get  discounted  for 
him,  and  B,  takes  them  to  his  own  banker  for  that  purpose, 
who  insists  on  placing  them  to  the  credit  of  B.,  B.'s  account 
then  showing  a  balance  against  him,  equity  would  still  com- 
pel the  banker  to  account  to  A.^'^ 

And  if  the  bank  has  notice  that  paper  does  not  belong  to 
the  debtor,  as  where  one  bank  sends  paper  to  another  indorsed 

18  Manningford  v.  Toleman,  1  Coll.  G70;  Stackhouse  v.  Countess  of 
Jersey,  .'50  L.  J.  Ch.  421;  Murray  v.  Tiiikett,  12  CI.  &  F.  7G4;  Locke  v. 
Prescott,  32  Beav.  2G1. 

1*  National  Bank  v.  Insurance  Co.,  104  U.  S.  54;  KuatchbuU  v.  Hal- 
lett,  L.  R.  13  Ch.  Div.  096;  Cook  v.  Tullis,  18  Wall.  332;  Burtnettv. 
First  National  Bank,  38  Mich.  630;  Neely  r.  Rood,  54  Mich.  134.  See 
Title,  §  5G.3. 

15  Barnett  v.  Brandao,  G  M.  &  G.  630. 

18  As  where  the  deposit  was  really  trust  money,  or  a  note  belonging  to 
another,  though  unknown  to  the  bank,  the  latter  may  apply  it  on  the 
depositor's  debt.  School  District  v.  First  National  Bank,  102  Mass.  174 ; 
Wood  V.  Boylston  National  Bank,  129  Mass.  358;  Gordon  v.  Kearney, 
17  Ohio,  572.     See  Title,  §  5G5. 

"  Grant  on  Banking,  307;  Lord  Bolingbroke's  Case,  in  Joy  v.  Camp- 
bell, 1  Sch.  &  L.  346. 
560 


LIEN.  §  327 

"  for  collection  on  account  of  A.  B.,"  the  receiving  bank  can- 
not apply  the  proceeds  to  the  debt  of  the  transmitting  bank, 
as  it  may  in  the  absence  of  any  notice  that  it  does  not  belong 
to  the  debtor  bank  ^^  (except  in  New  York,  &c.,  in  some  cases, 
see  Title,  §  565). 

§  327.  Several  Accounts  in  the  same  Right.  —  Where  a 
depositor  keeps  several  accounts  with  his  banker,  as,  for  ex- 
ample, a  general  account,  a  loan  account,  and  a  discount  ac- 
count, all  being  in  fact  kept  by  him  in  his  own  right,  nothing 
short  of  a  clear  and  distinct  contract  to  that  effect  will  pre- 
vent the  bank  from  fastening  its  lien  upon  any  securities  it 
may  obtain  for  reimbursement  of  any  of  these  accounts  which 
may  be  overdrawn.^ 

If  the  customer  has  more  than  one  account  with  his  bank, 
it  is  his  privilege,  upon  making  any  deposit,  to  declare  to  the 
credit  of  which  account  it  shall  be  carried,  and  the  banker 
cannot  alter  this  appropriation.  But  if,  at  the  time  of  depos- 
iting, the  depositor  neglects  to  appropriate,  then  the  bankers 
may,  ivithin  any  reasonable  time  thereafter,  appropriate  the 
amount  to  either  of  the  customer's  accounts  that  they  see  fit.^ 
The  importance  of  this  privilege  to  the  bank  is  easily  seen 
to  be  great  when  it  happens  that,  at  the  time  of  making  the 
deposit,  the  customer  has  overdrawn  any  one  of  his  several 
accounts,  for  then  the  bank  may  apply  upon  this  account  the 
amount  of  any  unappropriated  deposit.  But,  except  for  this 
privilege,  the  bank  must  preserve  the  distinction  between  the 
accounts,  and  could  not  transfer  from  one  to  supply  a  defi- 
ciency in  another,^  nor  appropriate  a  deposit  expressed  to  be 
made  to  the  one  to  any  other ;  ^  unless,  indeed,  the  accounts, 

18  Bank  of  Metropolis  v.  First  National  Bank,  22  Blatchf.  58;  First 
National  Bank  v.  Reno  Co.  Bank,  3  Fed.  Rep.  257;  Claflin  v.  Wilson, 
51  Iowa,  15  ;  White  v.  National  Bank,  102  U.  S.  658;  Blaine  v.  Bourne, 
11  R.  I.  119. 

1  §  327.  In  re  European  Bank,  8  L.  R.  41;  and  see  Pedder  v.  Preston, 
9  Jur.  N.  s.  496;  11  C.  B.  n.  s.  535. 

2  Simson  v.  Ingham,  2  Barn.  &  Cr.  72;  State  Bank  v.  Armstrong,  4 
Dev.  519. 

8  Ex  parte  Kingston,  In  re  Gross,  6  L.  R.  Ch.  632. 
*  Farley  v.  Turner,  26  L.  J.  Ch.  710. 

VOL.  I.  36  561 


§  327  LIEN    AND    SET-OFF. 

tlioutrli  in  f(irm  distinct,  arc  yet  both  in  fact  kept  by  the  de- 
positor in  the  same  right,  in  which  case  it  seems  that  the  bank 
may  protect  itself  by  such  process  of  transferring  credits  and 
debits  between  the  two  as  may  be  necessary.^ 

(a)  An  entry  in  the  customer's  books  has  been  held  not  to 
be  evidence  of  an  appropriation  by  him.*^ 

It  has  been  held  that  a  banker  may  appropriate  a  deposit, 
not  appropriated  by  the  depositor,  to  the  credit  of  an  account 
or  indebtedness  owing  by  this  depositor  to  this  banker  and  a 
former  partner  of  his ;  although,  at  the  same  time,  the  de- 
positor is  also  indebted  upon  a  further  account  to  the  banker 
liimself,  as  successor  to  the  old  firm  J 

(i)  But  if  a  stipulation  of  suretyship  in  terms  expressly 
appears  to  provide  for  and  cover  a  series  of  future  advances, 
to  be  constantly  paid  off  and  renewed,  it  is  obvious  that  the 
surety  is  not  discharged  when  the  amount  named  in  the  bond 
has  been  once  met  by  deposits.® 

(c)  Where  a  running  account  contains  legal  and  illegal 
items  mingled  together,  payments  will  be  considered  as  ap- 
propriated to  discharge  the  legal  items,  in  their  own  order,  in 
preference  to  the  illegal  itcms.^ 

(t?)  An  unappropriated  deposit  may  be  appropriated  by  the 
banker  to  the  discharge  of  an  indebtedness  of  the  depositor 
barred  by  the  Statute  of  Limitations. ^^ 

(e)  A  depositor's  balance  in  one  branch  of  a  bank  may 
be  applied  to  his  debt  in  another  branch.  A.  had  a  bal- 
Bank  may  anco  at  the  L.  branch  of  a  bank,  and  owed  the  B. 
rccoumi.  of'  branch.  He  drew  a  check  on  the  L.  branch,  but  the 
its  branches,  bank  combiucd  the  accounts  of  the  two  branches, 
thus  reducing  A.'s  assets  below  the  amount  of  the  check, 
and  refused   to   pay  it.      There   being   no   special    contract, 

6  Pedder  v.  Preston,  9  Jur.  n.  s.  496 ;  11  C.  B.  N.  s.  535;  and  see  In  re 
European  Bank,  8  L.  R.  41. 

*  Manning  v.  Westerne,  2  Vern.  606. 

7  Snead  v.  Williams,  9  L.  T.  n.  s.  115. 

8  Henniker  v.  Wigg,  4  Q.  B.  792. 

9  Ex  parte  Randleson,  2  Deac.  &  C.  534;  Wright  v.  Laing,  3  Barn.  & 
Cr.  165. 

"  Williams  v.  Griffith,  5  Mee.  &  W.  300. 
662 


LIEN.  §  329 

it   was   held    that    the    bank    could    rightfully    combine   the 
accounts. ^^ 

§  328.    What  can  be  charged  on  General  Account.  —  A.  had 
deposited  money,  notes,  checks,  <fcc.  on  general  account,  so 
that  at  his  death  the  bank  owed  him  |930.     But  jjoneyre- 
the  bank  had  a  judgment  against  him  more  than   ^'^^';4^J^f*j 
enouorh  to  offset   this,  and  A.  had  moreover  kept   use  of  the 

•  1  •  1  -J.     I'^iik  may 

a  sum  of  money  that  had  been  given  him  to  deposit  be  charged 
in  the  bank.  Upon  the  question  whether  the  bank  ^s*^'"^'  "*"• 
had  a  right  to  charge  against  A.'s  general  account  the  sum 
received  for  use  of  the  bank,  and  which  he  refused  to  pay 
over,  the  court  said :  "  There  can  be  no  question  that,  if  the 
bank  had  paid  off  a  note  or  acceptance  of  his,  payable  at  the 
bank,  this  would  have  constituted  a  proper  debit  in  the  ac- 
count. It  is  not  to  be  doubted  also  but  that  they  had  a  right 
to  apply  his  funds  in  their  hands  to  the  payment  of  any  note 
or  acceptance  of  his  held  by  them.  From  the  nature  of  this 
account  as  an  open  running  account  of  the  cash  transac- 
tions of  the  parties,  embracing  a  variety  of  receipts  and  pay- 
ments, debits  and  credits,  from  the  manner  of  their  dealing, 
<fec.,  either  has  a  right  to  retain  for,  or  to  charge  in  account 
against  the  other,  money  received  hy  the  latter  for  the  use  of 
the  former,  so  that  the  balance  thus  ascertained  shall  be  the 
true  debt."  ^ 

§  329.  Unmatured  Debt.  —  The  lien  of  the  bank  does  not 
attach  until  some  indebtedness  is  actually  in  exist-  At  law,  no 
ence  and  matured.^  Thus,  a  bank  holding  a  note  loHmnia-"^^ 
of  a  depositor  has  no  right  of  set-off,  and  no  valid  ^^^^  ^^^^' 
lien,  before  the  note  matures ;  so  that  it  has  been  held  that  if, 
in  the  interval  before  the  maturity,  the  depositor  makes  an 
assignment  of  his  funds,  without  the  knowledge  of  the  bank, 
but  otherwise  legal,  the  amount  of  his  balance  will  pass  to 
the  assignee.^     So  in  Illinois  and  Missouri  it  is  held  that  a 

"  Garnett  v.  M'Kewan,  Law  R.  8  Ex.  10  (1872). 
^  §  328.    State  Bank  v.  Armstrong,  i  Dev.  519.     See  Dale  v.  Sollet, 
4  Bur.  2133;  Green  v.  Farmer,  4  Bur.  2214. 

1  §  329.    Jordan  v.  National  Shoe  &  Leather  Bank,  74  N.  Y.  467. 

'^  Giles  V.  Perkins,  9  East,  12,  per  Lord  Ellenborough ;    Beckwith  v. 

663 


§  329  LIEN   AND   SET-OFF. 

bank  has  no  lien  on  the  funds  of  a  depositor  to  apply  them 
on  a  debt  not  yet  due,^  and  cannot  retain  them  against  a 
check-holder.* 

This  is  at  strict  law.  But  it  would  seem  that  in  equity  the 
bank  might  have  a  safeguard.  The  case  has  arisen  where  a 
E  uitv  will  depositor's  note  had  been  discounted  by  the  bank  ; 
guard  against  before  its   maturity  he  died  ;    at  the  time  of  his 

danger  of  loss  p     i  .        i  •  i     i     xi 

if  it  exists,  by  death  the  amount  of  his  deposit  exceeded  the 
bank  to^retlfin  aiuount  of  the  notc ;  by  a  court  of  equity  it  was 
againstlm-  lield,  upon  application  by  the  bank,  and  proof  of 
matured  debt,  (jajigcr  of  the  iusolvoncv  of  his  estate  and  also  of 
the  indorsers  on  the  note,  that  equity  would  allow  the  bank 
to  retain  enough  of  the  deposit  to  meet  the  note ;  though, 
it  was  said,  in  law  the  debt  in  futuro  could  not  be  set  off 
against  the  debt  in  prcesenti.^  The  sound  justice  of  this  is 
obvious.  For  it  is  certain  that  bankers  will  often  make  loans 
and  discounts  to  a  good  customer,  whose  balance,  though  con- 
stantly shifting,  is  generally  good,  with  the  fair  expectation 
that,  in  the  ordinary  course  of  dealing,  they  will  in  time  have 
funds  enough  come  to  their  hands  to  secure  them  against 
loss.  But  where  the  bank  discounted  the  customer's  note  for 
$5,000,  placing  the  amount  to  his  general  credit,  and  he  gave 
his  check  for  fii'1,000,  and  then  became  bankrupt,  it  was  held 
that,  as  against  the  owner  of  the  check,  the  bank  had  no 
lien  on  the  general  deposit  account  to  secure  the  note,  which 
had  not  yet  matured  at  the  time  when  the  check  was  pre- 
sented for  payment.^  This  case  arose  in  Illinois,  where 
the  check-holder's  right  of  action  against  the  bank  is  rec- 
ognized. In  the  absence  of  such  a  right  of  action,  it  is  not 
impossible  that  the  bank  might  have  simply  refused,  with 

Union  Bank,  4  Sandf.  604,  is  sometimes  cited  to  the  same  point,  but 
it  is  not  a  very  satisfactory  authority.  Jones  v.  Manufacturers'  Bank, 
10  Week.  No.  Cas.  102. 

3  Merchants'    National    Bank  v.   Ritzinger,  20  111.    App.   29   (1886); 
Com.  National  Bank  v.  Proctor,  98  111.  558. 

*  Zelle  V.  German  Savings  Institution,  4  Mo.  App.  401  (1887). 

6  3  Leigh,  695. 

»  Fourth  National  Bank  of  Chicago  v.  City  National  Bank  of  Grand 
Rapids,  68  111.  398. 
564 


LIEN.  §  331 

impunity,  to  honor  the  check,  and  so  ultimately  secured  all 
the  advantages  of  the  lien  which  the  law  expressly  declares 
not  to  exist. 

It  has  been  held  also,  in  New  York  and  Missouri,  that 
if  a  depositor  is  insolvent  his  deposit  may  be  retained  for 
an  unmatured  debt.'^  Equitable  set-offs  existed  before  statu- 
tory ones,  and  are  independent  of  the  latter ;  ^  and  although 
future  debt  cannot  at  law  be  offset  against  present  debt,^ 
yet  equity  will  always,  upon  proof  of  danger,  as  by  the  prob- 
able insolvency  of  the  debtor,  allow  the  bank  to  retain  his 
deposit.^'' 

So  in  Ohio  an  unmatured  note  discounted  by  the  bank  can 
be  set  off  against  the  deposit,  saving  harmless  bona  fide 
check-holders.^^ 

§  330.  Loss  of  Lien.  —  A  lien  may  be  lost,  if,  after  it  has 
been  established,  the  banker  takes  security  for  the  debt,  pay- 
able at  a  distant  day.^ 

So  a  lien  may  be  lost  by  voluntarily  giving  up  possession  of 
the  property,  or  by  conversion,  or  express  agreement.  But 
loss  of  possession  by  force,  fraud,  or  mistake  will  not  destroy 
a  lien,  nor  will  a  proper  repledging  of  pledged  property  on  the 
first  pledgee's  account,  if  the  repledging  does  not  go  beyond 
the  first  pledgee's  right  in  the  property. 

§  331.    Bank    estopped    to   assert    a   Lien.  —  Where    a    bank 
made  a  mistake  in  settlement,  but  waited  until  two  years  after, 
when  the  former  depositor  opened  a  new  account,   ^^^^,^  ^^^ 
and  then  sprung  the  claim  upon  him,  it  was  held   faith  in  se- 

>■  '=>  ^  '  cretine  a 

that  such  conduct  was  not  up  to  the  proper  stan-  demand  held 
dard  of  good  faith,  that  the  bank  should  have  noti-  ^°  ^^^°^ 
fied  the  depositor  at  once  of  the  error,  and  that  its  silence 

'  Jordan  v.  National  Shoe  &  Leather  Bank,  74  N.  Y.  473;  Knecht  v. 
United  States  Savings  Institute,  2  Mo.  App.  563. 

8  Story's  Equity,  ch.  38;  Ex  parte  Stevens,  11  Ves.  Jr.  24;  Ex  parte 
Flint,  1  Swans.  30;  Ex  parte  Blagden,  17  Ves.  Jr.  466. 

9  Martin  v.  Kunzmuller,  37  N.  Y.  396,  and  cases  cited. 
10  See  note  7. 

"  Shunk  V.  Merchants'  National  Bank,  19  Chic.  Leg.  N.  S3. 
1  §  330.    Cowell  V.  Simpson,  16  Ves.  Jr.  278;  Hewison  v.  Guthrie,  3 
Scott,  311 ;  2  Bing.  N.  C.  755. 

665 


§  332  LIEN   AND    SET-OFF. 

had  misled  the  depositor  into  making  a  new  deposit,  and  the 
bank  could  not  retain  it.' 

It  seems  clear  that  the  bank's  conduct  was  not  fair,  but 
that  alone  is  not  enough  to  change  legal  rights ;  the  further 
question  must  be  answered.  Did  the  neglect  of  the  bank  to 
notify  the  depositor  occasion  him  any  loss,  or  render  the  evi- 
dence of  the  matter  obscure  ?  If  the  mistake  could  be  clearly 
proved,  and  the  bank,  knowing  the  man,  preferred  the  method 
it  selected  to  a  lawsuit,  and  no  injury  was  done  to  the  deposi- 
tor we  cannot  see  why  the  bank  might  not  retain  the  deposit. 
But  if  the  depositor  drew  checks  against  the  new  deposit,  and 
only  on  their  presentation  was  notified  of  the  claim,  the  bank 
should  be  held  estopped. 

(a)  B.,  after  depositing  title  deeds  with  a  bank  to  secure 
all  sums  to  become  due  on  a  general  balance  of  his  account 
So  the  bank  with  the  bank,  contracted,  with  the  bank's  knowl- 
is  estopped  to  ^       ^^  ^^^^  pj^j.^  ^f  ^j^q  j^nd  to  R.,  who  knew  of  the 

assert  a  lien      ^^o^'  r  ' 

against  R.  as  tcrms  of  dcposit  of  the  deeds.     B.  afterwards  paid 

to  advances  ^  i  i  i  i         •  i 

made  after  R.  into  the  bank  more  than  the  balance  due  at  at  the 
partofthe^  timc  of  the  coutract  of  sale,  thus  (according  to 
b'v  uriien!"^  Clayton's  Case,  1  Meriv.  585)  discharging  his  debt, 
bank's'^kno'wi-  '^^^^  hsuik,  without  notifying  R.,  made  fresh  ad- 
edge.  vanccs  to  B.,  keeping  him  always  in  debt  to  the 

bank.  R.  paid  the  purchase  money  by  instalments  to  B.  Held 
that  the  bank  had  no  charge  on  the  land  as  against  R.  for  the 
fresh  advances ;  also,  that  the  bank  had  no  charge  upon  the 
purchase  money. 

The  bank  was  estopped  from  claiming  a  lien  against  R. 
for  a  cause  arising  subsequent  to  R.^s  purchase  with  the  knowl- 
edge of  the  hank? 

§  382.  General  Liens  are  not  favored,  and  must  rest  upon 
special  agreement,  course  of  dealing  between  the  parties,  or 
general  usage.' 

And  if   there  is   any  circumstance   inconsistent  with  the 

1  §  331.    Hancock  v.  Citizens'  Bank,  32  La.  An.  .590. 

2  London  &  Co.  Banking  Co.  v.  Ratcliffe,  L.  R.  6  App.  Gas.  722 
(1881). 

1  §  332.    Grant  v.  Taylor,  35  N.  Y.  Super.  Ct.  351. 
566 


SET-OFF.  §  334 

claim  of  a  lien,  it  will  not  be  upheld,  as  where  securities  are 
delivered  to  a  bank  for  a  specific  purpose.^ 

§  333.    A  Banker's   Lien   in   Pennsylvania,  New  York,  &c.  — 
Tlie  pledge  of  securities  for  an  antecedent  debt,  being  founded 
on  no  present  valuable  consideration,  is  taken  sub-  Antecedent 
ject  to  the  equities  subsisting  between  the  pledgor  ^^^^' 
and  third  parties.^ 

The  doctrine  in  Pennsylvania  is,  that  a  banker  has  a  general 
lien  on  securities,  unless  deposited  under  express  contract,  or 
under  circumstances  showing  an  implied  inconsistent  con- 
tract ;  but  a  holder  merely  for  an  antecedent  debt  is  not  pro- 
tected against  equities  existing  in  third  parties,  and  the  courts 
say  that  neither  decisions  out  of  Pennsylvania  nor  usage  can 
affect  the  rule.  It  is  very  probable,  however,  that  they  are 
mistaken  in  this,  and  that  succeeding  judges  may  find  a 
way  to  bring  Pennsylvania  into  harmony  with  her  sister 
States. 

§  334.    Set-off.  —  The    Debts   must   be  in  the   same  Right.  — 
The  debts  must  be  between  the  same  parties  and  in  the  same 
right.i     A  deposit  due  to  A.  as   executor   cannot   be   offset 
against  A.'s  personal  debt,  nor  vice  versa?    It  is  not  neces- 
sary that  the  claims  should  run  between  the  nominal  parties 
to  the  suit,  if  they  are  really  due  to  and  from  the  same  funds 
on  both  sides ;  as  where  a  note  was  discounted  for  ^ote  dis- 
the  benefit,  not  of  the  maker,  but  of  the  indorser,   benefiTof°^ 
it   was  held   in  a  suit    by   the   bank   against   the   endorser. 
maker,  that  a  deposit  to  the  credit  of  the  indorser  should  be 
set  off  against  the  note.^ 

And  in  another  case  where  a  note  was  discounted  for  an 
indorser,  and  the  amount  credited  to  him  and  partly  drawn 
out  by  him,  it  was  said  that  the  bank  could,  if  it  so  desired, 

2  Bank  of  Metropolis  v.  New  England  Bank,  1  How.  234. 

1  §  333.   Liggett  Spring  &  Axle  Co.'s  Appeal,  111  Pa.  St.  291. 

1  §  334.  Miller  y.  Mickel,  12  Pacif.  Rep.  240;  Scott  v.  Fritz,  51  Pa.  St. 
418;  Fry  v.  Evans,  8  Wend.  530;  Canonsburg  Iron  Co.  v.  Union  National 
Bank,  34  Pitts.  L.  J.  93  (1886);  Stuart  v.  Commonwealth,  8  Watts,  74; 
Grew  V.  Burditt,  9  Pick.  265  ;  Thomas  v.  Hopper,  5  Ala.  442. 

2  See  cases  above,  and  Tobey  v.  Mannf.  National  Bank,  9  R.  I.  236. 

3  Shackamaxon  Bank  v.  Kinsler,  16  Week.  No.  Cas.  509. 

567 


§  336  LIEN   AND    SET-OFF. 

apply  the  balance  rcmaiiiins:  to  the  indorser's  credit  toward 
payment  of  the  note.'*  An  individual  deposit  cannot  be  offset 
against  a  partnership  debt.^ 

It  would  seem  that  set-off  could  only  be  availed  of  by  the 
bank  in  respect  of  the  personal  deposits  of  the  depositor.  But 
Set-off  of  where  money  was  deposited  in  the  name  of  the 
deposit  m       depositor's  wife,   the    depositor  bein"j  at  the   time 

wiie  s  name  i  '  i  ~ 

against  hus-    insolvent   and  indebted   to   the   bank,   set-off  was 

band  s  g,eut, 

for  tiie  money  allowcd  upon  proof  that  the  money  thus  deposited 
from  hus-  had  bccn  raised  upon  a  mortgage  of  the  husband's 
ertv,  Lrdl!^    property,  in  which  the  wife  had  joined  in  the  usual 

was  insolvent,  f  ,)j.jit  6 

§  335.  Certainty.  —  The  claim  set  off  must  be  certain,  i.  e. 
either  already  reduced  to  precise  figures,  or  capable  of  being 
liquidated  by  calculation  without  the  intervention  of  a  jury 
to  estimate  the  sum.^  And  when  the  claim  sought  to  be 
used  as  an  offset  requires  the  decision  of  a  jury  on  the  ques- 
tion of  ne2;ligence  before  the  claim  is  established,  it  cannot 
be  offset,  even  though  the  amount  of  the  judgment  is  very 
clear,  provided  there  should  be  any  judgment  in  favor  of  the 
claim.  As  where  a  bond  deposited  as  collateral  for  a  note  was 
lost,  and  in  suit  by  the  bank  on  the  note  the  maker  tried  to 
offset  the  loss  of  the  bond.^ 

A  judgment,  or  contract  claim,  that  can  be  sued  in  debt, 
assumpsit,  or  covenant,  may  be  set  off.^  But  a  demand  that 
must  be  sued  upon  in  tort,  or  by  bill  in  equity,  cannot  be 
set  off> 

§  336.  Goods  as  such  not  a  Subject  of  Set-off.  —  Certified 
Check  in  Set-off.  —  A  bank  may  set  off  a  discounted  note 
held  by  it  against  pecuniary  credits  to  the  maker  upon  the 
latter's  insolvency.     Goods  merely  in  the  possession  of   the 

4  Ticonic  Bank  v.  Johnson,  21  Me.  42G. 

6  International  Bank  of  Chicas-o  v.  Jones,  9  N.  E.  885  (III,  Feb.,  1887). 

6  Citizens'  Bank  of  Garnet  v.  Bowen,  21  Kans.  354. 

1  §335.  Wiltnot  v.  Hurd,  11  Wend.  584;  Thomson  v.  Redman,  11 
M.  &  W.  487. 

2  Winthrop  Savings  Bank  r.  Jackson,  67  Me.  570. 
8  Ilutchin.son  v.  Sturges,  Willes,  261. 

♦  Dean  v.  Allen,  8  Johns.  390;  Gilchrist  v.  Leonard,  2  Bailey,  135. 

668 


SET-OFF.  §  337 

bank,  and  not  intrusted  to  it  to  be  turned  into  a  money  credit, 
arc  not  the  subject  of  set-off.^ 

Herein  set-off  differs  from  a  lien.  Set-off  cannot  confer  a 
right  to  detain  property  the  title  to  which  is  in  another,  but 
only  to  set  one  money  claim  against  another. 

(a)  A  banker,  upon  whom  a  check  has  been  drawn,  and 
who  has  certified  it,  cannot  set  off  against  the  same  any  debt 
or  demand  which  he  may  have  against  the  holder  when  the 
check  is  finally  presented  for  payment.  For,  it  is  said,  the 
check  is  not  a  payment  made  by  the  drawer  to  the  holder, 
creating,  therefore,  a  new  debt  from  the  banker  to  the  holder, 
but  is  merely  a  means  of  procuring  payment;  and  if  that 
means  should  fail  from  any  cause,  be  it  such  a  set-off  or  other 
circumstance,  the  drawer  remains  liable."-^  This  reasoning 
seems  by  no  means  beyond  criticism.  The  unquestionable 
■weight  of  the  authorities  is  to  the  purport  that  the  certification 
does  create  a  direct  debt  from  the  bank  to  whomsoever  is  or 
may  come  to  be  the  holder  of  the  check,  and  that  such  holder 
occupies  the  position  of  a  simple  contract  creditor  or  deposi- 
tor ;  also  that  the  drawer  does  not  remain  liable  on  his  origi- 
nal debt.  If  such  be  the  case,  it  is  hard  to  see  why  the  set-off 
might  not  be  allowed. 

§  337.  When  Depositor  is  Insolvent.  —  The  various  items  of 
deposit  with  and  payment  by  the  bank  form  a  running  account 
between  the  bank  and  the  customer.  For  any  indebtedness 
accruing  from  the  customer  to  itself,  the  bank  has  the  right 
of  set-off.  If  the  depositor  becomes  bankrupt,  his  deposit  be- 
comes security  for  the  payment  of  his  debt  to  the  bank.  If 
this  debt  be  contingent  in  character,  or  if  it  be  a  claim  for 
unliquidated  damages  arising  out  of  a  contract,  then  the  bank 
may  retain  possession  of  the  deposit  until  such  time  as  the 
probable  indebtedness  shall  be  ascertained,  when  the  deposit 
may  be  set  off  against  it.^  The  rule  was  laid  down  by  Judge 
Lowell  in  the  case  cited,  that  "  the  credit  should  be  set  off 

1  §  336.  Stetson  v.  Exchange  Bank,  7  Gray,  425,  citing  Demmon  v. 
Boylston  Bank,  5  Cusli.  194;  Rose  v.  Hart,  S  Taunt.  499. 

2  Brown  v.  Leckie,  43  111.  497. 

1  §  337.    In  re  North,  16  N.  B.  R.  (Mass.  Dist.)  420;  Ex  parte  Howard 

669 


§  338  LIEN    AND    SET  OFF. 

against  the  whole  ultimate  debt  of  the  bank,  that  is  to  say 
a<rainst  the  afrfrrccrate  amount  of  the  notes  of  the  bankrupt  in 
which  he  is  the  princii)al  debtor  ;  and  as  to  those  on  which 
he  is  indorser  so  far  and  so  far  only,  as  is  made  necessary  by 
the  insolvency  of  the  real  i)rincij)als." 

Jud^c  Lowell  further  said,  that  he  understood  "the  practice 
in  England  to  be,  that  a  banker  who  has  discounted  notes  for 
his  customer  may  prove  for  the  whole  money  as  so  much  lent 
to  the  customer,  exhibiting  a  list  of  his  notes  or  bills,  which 
are  called  securities.  Any  deposit  the  banker  has  in  hand 
would  come  out  of  this  sum  total.  If,  however,  any  bill  or 
note  is  paid  by  other  parties  after  the  proof  has  been  admitted, 
its  amount  is  to  be  deducted  from  the  total  debt  proved.  In 
other  words,  the  proof  is  considered  as  made  on  each  note  or 
bill  separately,  though  not  so  in  form."  ^ 

§  338.    Insolvency  of  the  Bank.  —  Commercial  Bank.  —  Where 

the  bank  itself  stops  payment  and  becomes  insolvent,  the  cus- 
Bank  insoi-  tomcr  may  avail  himself  in  set-off  against  his  in- 
vent, debtedness  to  the  bank  of  any  indebtedness  of  the 
bank  to  himself,  as,  for  example,  the  balance  due  him  on  his 
deposit  account.^  So  also,  even  though  the  debt  to  him  has 
not  matured  at  the  time  of  the  insolvency.^ 

The  maker  ^  or  indorser  ^  of  a  note  falling  due  after  insol- 
vency may  set  off  his  deposit,  or  a  debt  due  him  at  the  time 
of  the  assignment,  but  not  a  claim  coming  to  him  after  the 
assignment.^ 

The  set-off  may  be  made  equally  well  though  the  money 
deposited  is  not  the  money  of  the  depositor,  but  the  property 

National  Bank,  2  Low.  487.  See  Kelly  &  Co.  v.  Phelan,  5  Dill.  228; 
Ex  parte  Hornby,  De  Gex,  G9. 

2  Ex  parte  Burn,  2  Rose,  55;  Ex  parte  Barratt,  1  Gl.  &  J.  327;  Ex 
parte  Hornby,  De  Gex,  G9. 

1  §  338.  IMcLaren  v.  Pennington,  1  Paige,  102;  Receivers  v.  Patterson 
Gas  Light  Co.,  23  X.  J.  Law,  283;  Piatt,  Receiver,  v.  Bentley,  11  Am. 
Law  Reg.  171. 

2  Bruyn  v.  Receiver,  9  Cow.  413,  n. 
8  Jordan  v.  Sharlock,  81  Pa.  366. 

*  Arnold  v.  Niess,  36  Leg.  Int.  4.37. 
^  Venango  National  Bank  v.  Taylor,  56  Pa.  14. 
670 


SET-OFF.  §  340 

of  others  held  by  him  in  trust  or  as  custodian,  and  deposited 
by  liim  as  trustee.*'  But  the  accounts  of  individuals,  as  such, 
and  of  a  firm  of  which  they  are  members,  cannot  be  thus 
availed  oV     See  §  560. 

In  an  action  by  a  receiver  of  an  insolvent  bank  on  a  note, 
defendant  offering  as  set-ofle  a  certificate  of  deposit   ^^^_^^  ^^ 
must  show  that  he  received  it  before  the  filing  of  ^^-Jificate  of 
the  bill  by  which  the  assets  of  the  bank  were  im-  case  of  in- 

•'  ,  ^  solvency. 

pounded  for  benefit  of  all  its  creditors.** 

§  339.  Insolvency  of  Savings  Bank.  —  So  long  as  the  bank 
is  solvent  a  depositor  may  offset  his  deposit  against  his  debt 
to  the  bank,  but  so  soon  as  the  bank  becomes  insol-  Depositor 
vent  this  cannot  be  allowed.  The  depositors  reap  ^^^jfp^^lf ' 
the  profits,  and  must  bear  the  losses  resulting  from  ?J'^^"j^^^'j''  '^ 
the  business  of  the  bank.^ 

§  340.  Set-off  as  against  Debtor's  Representatives.  —  If  the 
debt  be  mature  at  the  time  of  the  debtor's  death,  the  bank  has 
the  right  of  set-off  as  against  the  heirs,  executors,  and  admin- 
istrators of  the  deceased,  whether  the  estate  be  solvent  or  in- 
solvent, precisely  as  it  would  have  enjoyed  the  same  right 
against  the  customer  himself  in  his  lifetime.^ 

6  Miller  v.  Receiver  of  Franklin  Bank,  1  Paige,  444. 

•?  Watts  V.  Christie,  11  Beav.  546. 

8  Smith  V.  Mosby,  9  Heisk.  501  (1872)  Tenn. 

1  §  339.  Hannon  v.  Williams,  34  N.  J.  Eq.  255;  Lawrence  v.  Nelson, 
21  N.  Y.  158.  Contra,  Matter  of  Receiver  of  New  Amst.  Savings  Bank 
V.  Tartler,  54  How.  Pr.  385;  s.  c.  4  Abb.  N.  C.  215. 

1  §  340.    State  Bank  v.  Armstrong,  4  Dev.  519. 

571 


CHAPTER   XXI 11. 

ADVERSE   CLAIM. 

§  341.    Analysis. 

Justifiable  payment. 
§  342.  A  payment  otherwise  good  is  not  invalidated  by  the  existence 

§  344.  of  a  claim  of  which  the  bank  has  no  notice  at  the  time  of 

payment. 
But  after  notice  of  an  adverse  title,  a  bank  pays  at  its  peril ;  yet, 
§  342.  if  sued  or  threatened  with  suit  by  the  depositor  or  his  attaching 

§  343.  creditor,  the  bank  cannot  itself  set  up  the  adverse  title,  but  may 

{b)  resort  to  a  bill  of  interpleader.     If  it  does  not  secure  itself  in  this 
way,  or  by  obtaining  a  bond  of  indemnity,  it  may  have  to  pay  a 
second  time. 
The  true  owner  can  recover  in  a  suit  against  the  bank,  even  though 
§  343.  he  did  not  give  notice  of  his  claim  till  after  service  of  attachment 

on  the  deposit  by  a  creditor  of  the  depositor,  but  the  court  will 
require  him  to  give  the  bank  a  bond  of  indemnity. 
The  substance  of  the  matter  is,  that,  as  the  bank  is  not  at  all  inter- 
ested in  such  disputes,  it  should  not  be  annoyed  and  put  to  ex- 
pense and  danger  by  them.  The  bank,  not  being  in  any  fault, 
should  not  be  compelled  to  bear  the  consequences  of  the  faults  of 
others.  Whenever  an  adverse  claim  exists,  the  bank  should  not 
be  required  to  pay  until  the  disputants  have  settled  the  matter 
between  themselves,  or  one  of  tliem  will  give  the  bank  a  bond; 
and  if  either  claimant  sues  the  bank,  it  siiould  have  the  privilege 
of  sending  the  service,  or  referring  the  officer  making  service,  to 
the  opposing  party,  whereupon  he  should  be  considered  the  real 
party  to  the  suit,  and  be  bound  thereby,  so  that  payment  in  ac- 
cordance with  the  judgment  rendered  would  forever  release  the 
bank.  Mere  notice  to  the  bank  of  adverse  claim  should  only  affect 
it  long  enough  for  the  claimant  to  proceed  against  the  depositor 
directly ;  and  if  he  does  not  promptly  do  this,  the  bank  should  be 
free  to  act  as  if  it  had  never  received  notice  of  his  claim. 
A  statute  is  in  order  to  amend  the  injustice  of  the  common  law  in 
this  matter,  which  puts  the  bank  to  the  expense  of  defending  itself 
in  suits  in  which  it  has  no  interest,  or  to  the  expense  of  a  bill  of 
interpleader  (in  those  cases  where  it  will  be  allowed,  for  it  is  not 
a  remedy  that  can  be  used  in  all  cases  of  adverse  claim,  it  only 
applies  where  the  claims  are  founded  in  privity  or  common  con- 
tract, and  strangers  cannot  be  compelled  to  interplead,  especially 
where  tort  has  intervened).  2  Story's  Eq.  Juris.,  §§  812,  817- 
820;  Story  on  Agency,  §  217  ;  Viner's  Abr.  Enterpleader. 
572 


HOW   BANK   CAN   SECURE   ITSELF.  §  342 

§  342.  Payments  in  Case  of  Adverse  Claims.  —  A  bank  is  jus- 
tified in  paying  to  the  depositor  or  his  order,  or  to  the  order 
of  one  designated  by  the  depositor,  until  the  fund  is  claimed 
by  some  other  person.^  But  if  notified  that  the  deposit  be- 
longs to  another,  it  will  pay  the  depositor  at  its  peril.^ 

After  notice  that  a  third  person  claims  under  a  superior 
title,  and  intends  to  enforce  the  claim  adversely  to  the  de- 
positor, the  bank  should  hold  the  funds  until  the  title  is 
settled,  or  take  a  bond  of  indemnity,  otherwise  it  may  be  the 
loser ;  as  where  a  deposit  in  the  name  of  A.  was  garnisheed 
as  her  husband's,  the  court  decided  that  it  belonged  to  him, 
and  the  bank  paid  it  into  court ;  but  in  a  subsequent  suit  it 
was  shown  to  belong  to  A.,  and  the  bank  had  to  repay  the 
amount.^ 

(a)  A  bank  cannot  defeat  the  suit  of  its  depositor  by  show- 
ing adverse  title  in  another.  That  other,  or  his  attaching 
creditor,  may  dispute  the  depositor's  title,  but  not  the  bank  ;* 
and  as  we  have  just  seen,  even  a  payment  under  judgment 
will  not  save  the  bank  from  liability  to  the  depositor.  A 
bank  may  be  able  to  save  itself  from  future  loss  by  persuad- 
ing the  party  to  whom  it  makes  payment  to  give  it  a  bond  of 
indemnity. 

(5)  And,  if  possible,  the  claims  should  be  adjusted  without 
resorting  to  a  bill  of  interpleader ;  but  if  a  settlement  cannot 
be  reached  that  will  insure  safety  to  the  bank,  and   Bill  of  in- 
it  has  reason  to  believe  that  the  claim  adverse  to   terpieader. 
the  depositor  is  well  founded,  it  should  bring  the  bill.^ 

1  §  342.   McEwen  v.  Davis,  39  Tnd.  109. 

2  First  National  Bank  v.  Bache,  71  Pa.  213.  So  where  a  bank  paid 
money  standing  to  "  Trustees  of  Post  13  G.  A.  R."  to  one  of  the  trustees 
after  notice  from  the  Post  not  to  do  so,  it  was  liable.  Arnold  et  al.,  Post 
No.  13,  V.  Maeungie  Savings  Bank,  71  Pa.  287. 

8  Crumb  v.  Treiber,  Cuyahoga  Dist.  Ct.  Ohio,  4  Bull.  616;  Townsend 
V.  AVebster  Five  Cents  Savings  Bank,  Mass.  Sup.  Ct.,  9  N.  E.  R.  521. 

*  First  National  Bank  of  Lock  Haven  i'.  Mason,  95  Pa.  St.  113.  See 
German  Bank  v.  Himstedt,  42  Ark.  62. 

8  Bell  V.  Hunt,  3  Barb.  Ch.  391;  Bedell  v.  Hoffman,  2  Paige,  199; 
German  Exchange  Bank  v.  Commissioners,  6  Abb.  N.  C.  394;  Marvin  v. 
Ellwood,  11  Paige,  3G5. 

573 


§  342  ADVERSE    CLAIM. 

But  interpleader  will  not  be  decreed  in  some  cases  where  it 
is  most  essential  to  the  interest  of  the  bank  that  it  should  be. 
A  New  Jersey  case  -  strongly  illustrates  this.  The  Vice- 
Chancellor  said :  — 

"  This  is  a  bill  of  interpleader.  Its  object  is  to  compel  the 
defendants,  Philip  W.  Crater  and  Maria  L.  Bininger,  to  inter- 
plead in  respect  to  the  hostile  titles  they  set  up  to  three  gov- 
ernment bonds,  of  the  par  value  of  ^2500,  deposited  with  the 
complainants  by  Abraham  M.  Bininger,  to  indemnify  two 
gentlemen  who  became  his  sureties  on  a  recognizance,  given 
by  him  on  suing  out  a  writ  of  error  to  remove  a  judgment 
against  him. 

"  Mr.  Crater  and  Mrs.  Bininger  set  up  independent  adverse 
titles.  Mr.  Crater's  title  is  founded  in  the  ownership  of  Binin- 
ger. He  claims  by  virtue  of  a  judgment  against  Bininger, 
and  seizure  and  sale  of  the  bonds  under  it.  Mrs.  Bininger, 
who  is  the  wife  of  Abraham,  claims  that  the  bonds  were  pur- 
chased for  her,  with  her  own  money  ;  that  her  husband  never 
had  any  interest  in  them  ;  that  their  deposit  with  the  com- 
plainants was  wrongful  or  tortious  as  to  her,  and  that  the 
complainants,  in  withholding  them  against  her  demand,  are 
wrongdoers. 

"  It  will  thus  be  seen  that  the  position  of  the  complainants 
towards  the  opposing  claimants  is  radically  different.  To 
one  they  are  under  the  obligations  of  a  bailee.  He  may  re- 
cover the  bonds  without  showing  title.  When  the  object  of 
the  bailment  was  accomplished,  they  were  bound  to  surrender 
them  without  inquiry  as  to  title.  As  to  the  other,  if  her 
claim  is  true,  they  were  wrongdoers,  and  disputed  her  right 
to  the  possession  of  the  bonds,  at  their  peril. 

"  Ujider  this  state  of  facts,  have  the  complamants  a  right 
to  require  the  opposing  claimants  to  interplead  ? 

"  This  question  may  be  fully  answered  by  simply  quoting 
from  elementary  authorities. 

"  Judge  Story,  in  his  work  on  Bailments,  §  110,  says : 
'  Where   the   parties   claim   in  absolute   adverse   rights,  not 

0  First  National  Bank  of  Morristown  v,  Bininger,  26  N.  J.  Eq.  345 
(1875). 

674 


INTERPLEADER.  §  342 

founded  in  any  privit}^  of  title,  or  any  common  contract,  there 
the  bailee  must  defend  himself  as  he  may,  for,  generally 
speaking,  he  cannot  compel  strangers  to  interplead  with  each 
other.  Indeed,  our  law  goes  to  the  extent  of  ordinarily  deny- 
ing a  bailee  any  right  to  set  up  the  interest  or  title  of  a  third 
person  against  the  title  of  his  own  bailor.' 

"In  his  work  on  Equity  Pleadings,  §  293,  he  states  the 
rule  as  follows :  '  Where  the  claimants  assert  their  rights 
under  adverse  titles,  and  not  in  privity,  and  where  the  claims 
are  of  different  natures,  the  bill  is  wholly  unmaintainable.' 

"And  in  his  work  on  Equity  Jurisprudence,  §§  819,  820,  he 
gives  the  following  illustration,  and  then  states  what  he 
understands  to  be  settled  principle :  '  Where  a  person  is  in 
possession  of  property  as  bailee,  to  which  the  bailor  himself 
has  no  possessory  title,  but  he  is  a  mere  tortious  possessor, 
and  the  rightful  owner  demands  it  of  the  bailee,  in  such  a 
case  the  question  may  arise  whether  he  can  compel  the  bailor 
and  the  rightful  owner  to  interplead  with  each  other.  Upon 
principle,  it  would  seem  that  he  cannot,  for  not  only  is 
there  no  privity  between  him  and  the  rightful  owner,  but 
he  is  himself  liable  to  be  deemed  a  wrongful  possessor,  if  he 
should,  after  notice,  withhold  the  property  from  the  rightful 
owner.' 

" '  The  true  doctrine  would  seem  to  be,  that,  in  cases  of  ad- 
verse independent  titles,  the  party  holding  the  property  must 
defend  himself  as  well  as  he  can  at  law,  and  he  is  not  entitled 
to  the  assistance  of  a  court  of  equity,  for  that  would  be  to 
assume  the  right  to  try  merely  legal  titles  upon  a  contro- 
versy  between  different  parties,  where  there  is  no  privity 
of  contract  between  them  and  the  third  person  who  calls  for 
an  interpleader.' 

"Lord  Brougham,  in  Pearson  v.  Garden,  2  Russ.  &  Mylne, 
606,  in  commenting  on  the  question  as  to  whether  an  agent 
or  bailee  had  a  right  to  compel  his  principal  to  litigate,  with  a 
stranger,  the  title  to  property  held  by  him  for  his  principal, 
denied  its  existence  in  the  following  emphatic  language : 
'  Upon  such  a  state  of  facts,  can  I  hold  this  to  be  a  common 
case  of  a  claim  by  an  agent  against  his  principal,  and  of  an- 

675 


§  342  ADVERSE   CLAIM. 

other  party  claiming  by  another  title,  foreign  to  the  title  of 
the  principal?  That  an  agent  should  have  the  power  of 
filing  a  bill  of  interpleader,  when  his  principal  demands  the 
re-delivery  of  his  goods  bailed  with  him,  appeared  to  me  so 
monstrous  a  proposition,  and  to  involve  such  frightful  conse- 
quences in  mercantile  transactions,  that  I  could  not  suppose 
it  was  meant  to  contend  for  any  such  doctrine.  For,  in  fact, 
it  amounts  to  this :  that  an  agent  may,  at  any  moment, 
treat  his  principal  to  a  chancery  suit ;  and  I  was  there- 
fore relieved  to  find  that  the  plaintiff's  counsel  went  entirely 
on  the  peculiarity  of  this  case.' 

"  The  contract  of  bailment,  as  given  by  the  president  of  the 
complainants,  was  that  the  complainants  were  to  hold  the 
bonds  as  indemnity  to  the  two  gentlemen  who  had  become 
bail  for  Mr.  Bininger.  Though  there  was  no  express  stipula- 
tion to  that  effect,  the  law  made  it  the  duty  of  the  complain- 
ants to  surrender  the  bonds  to  Mr.  Bininger  when  the  liability 
of  his  bail  ended.  The  relation  of  the  complainants  to  Mr. 
Bininger  and  his  bail  grew  out  of  a  contract,  which  provided 
for  the  surrender  of  the  bond  in  spite  of  any  claim  which 
might  be  made  by  a  third  person. 

"  The  complainants  seek  to  put  their  case  on  the  ground 
that  they  are  stakeholders  or  trustees.  It  seems  to  me  im- 
possible to  say  they  hold  cither  of  these  relations  to  Mrs. 
Bininger.  At  the  time  of  the  bailment  she  was  unknown,  she 
had  no  connection  with  it,  and,  if  her  claim  is  true,  the  com- 
plainant's possession  of  the  bonds,  if  not  tortious  at  its  incep- 
tion, became  so  after  demand  and  refusal.  A  stakeholder  is 
a  third  person,  chosen  by  two  or  more  persons,  to  keep  in 
deposit  property  the  right  or  possession  of  which  is  in  dis- 
pute, until  some  one  of  them  establishes  his  right  to  it.  A 
trustee  is  a  person  who  holds  the  legal  title  to  certain  prop- 
erty, the  beneficial  use  of  which  belongs  to  another.  I  think 
it  would  be  an  unwarrantable  misuse  of  well  defined  terms  to 
hold  the  complainants  were  either  stakeholders  or  trustees  of 
Mrs.  Bininger. 

"  If  this  was  a  case  of  first  impression,  no  difficulty  would 
be  found  in  declaring  it  fell  clearly  within  the  purposes  de- 
576 


INTERPLEADER.  §  342 

signed  to  be  accomplished  in  the  estal^lishmcnt  of  a  court  of 
equity.  But  the  rule,  denying  the  right  of  the  complainants 
to  require  Mrs.  Bininger  to  interplead  with  the  other  defend- 
ants, is  too  firmly  established  to  be  changed  by  anything  short 
of  legislative  power.     (2  Story's  Eq  Jur.  §  820.) 

"1  cannot  break  through  a  rule  so  firmly  established  as  to 
be,  in  the  judgment  of  Judge  Story,  no  longer  open  to  dis- 
cussion, even  if  it  were  clear  that  a  better  could.be  invented. 
Stability  in  legal  rules  is  more  important  than  that  they 
should  accomplish  complete  justice  in  every  case." 

Here  we  have  a  case  in  which  the  bank  could  not  success- 
fully defend  itself  at  law  against  its  bailor,  because  it  could  not 
set  up  the  title  of  a  stranger ;  yet  if  the  title  of  the  stranger 
was  really  good,  the  bank  was  guilty  of  tort  in  refusing  to 
deliver  to  Mrs.  Bininger;  and  still  equity  calmly  says  it  can- 
not interfere  to  decree  interpleader  because  the  rule  is  well 
settled  that  the  parties  must  be  in  privity  in  order  to  the 
granting  of  such  decree.  A  stronger  call  for  legislative  cor- 
rection could  hardly  be  imagined,  and  it  might  be  urged  with 
force,  that  although  stability  in  the  law  is  valuable  and  not 
lightly  to  be  interfered  with,  and  when  the  law  is  only  a  for- 
mal one  this  rule  is  paramount,  yet  that  where  real  injustice 
exists  under  the  name  of  law,  to  give  stability  to  that  law  is 
to  fortify  injustice.  The  question  is,  Would  greater  harm 
result  from  change  than  from  continuance?  Change  in  this 
particular  case  would  not  result  in  any  commercial  disturb- 
ance, and  it  is  hard  to  see  why  a  court  of  equity,  acknowl- 
edging, as  the  New  Jersey  court  did,  the  justice  in  the  case, 
should  be  unwilling  to  add  one  more  stone  to  the  temple  of 
equity.  Its  walls  would  never  have  towered  above  the  com- 
mon law,  if  the  mind  of  every  judge  had  been  fettered  by  the 
opinions  of  his  predecessors. 

The  argument  at  B  is  baseless,  for  equity  would  not  have 
to  try  legal  titles,  but  only  to  send  the  parties  to  law  to  try 
them. 

The  argument  at  C  is  baseless,  for  it  is  not  the  agent  that 
treats  the  principal  to  a  suit,  but  the  third  party  who  claims 
adversely,  and  if  the  agent  does  not  act  bona  fide  in  the  mat- 
voL.  I.  37  677 


§  343  ADVERSE    CLAIM. 

ter,  of  course  lie  is  answerable,  and  if  the  stranger  does  not 
Avalk  up  and  take  his  part  when  interpleader  is  decreed,  the 
matter  is  settled  in  favor  of  the  principal. 

It  may  be  that  the  most  just  arrangement  would  be  that 
notice  from  the  adverse  claimant  to  the  bank  should  not  hold 
the  property  any  longer  than  would  be  necessary  for  said 
claimant  to  push  his  rights  directly  against  the  depositor; 
that  if  he  did  so,  he  should  have  an  order  (attachment,  gar- 
nishee, or  injunction)  from  the  court  to  the  bank  to  retain 
the  deposit  until  the  question  was  settled,  unless  bond  of  in- 
demnity be  given ;  but  that  if  he  did  not  within  a  reasonable 
time  after  notifying  the  bank  proceed  against  the  depositor 
directly,  the  bank  would  be  released  from  any  obligation  to 
him,  and  might  act  as  though  it  had  received  no  notice  of 
his  claim. 

§  343.  The  True  Owner  of  a  Deposit  may  recover  from  the 
Bank. — The  English  cases  at  law  hold  that  the  true  owner 
of  the  money  cannot  recover  it  in  a  suit  against  the  banker, 
even  after  such  notice.  "  It  is  impossible,"  says  Mr.  Grant, 
"  for  the  banker  to  set  up  a  jus  tertii  against  the  order  of 
the  customer,  or  to  refuse  to  honor  his  draft,  on  any  other 
ground  than  some  sufficient  one  resulting  from  the  act  of 
the  customer  himself."  ^  Though  in  equity  the  rule  would 
appear  to  be  different  even  in  England.^ 

(a)  In  the  United  States,  the  question  has  been  several 
times  discussed  in  the  courts  of  Pennsylvania,  and  the  posi- 
tion there  laid  down  gives  the  true  owner  a  right  to  the 
fund,  and  power  to  maintain  that  right  at  law  as  well  as  in 
equity.^  The  best  discussion  of  the  matter  will  be  found  in 
Farmers  and  Mechanics'  National  Bank  v.  King,  cited  in  the 

1  §  343.  Grant  on  Banking,  ed.  1873,  p.  118;  see  Sims  v.  Bond,  5  B.  & 
Ad.  389;  Tassell  v.  Cooper,  9  C.  B.  ;j09. 

2  See  Pennell  v.  Delfell,  4  De  G.  Mac.  &  G.  372;  Bridgman  v.  Gill,  24 
Beav.  302. 

8  Frazier  v.  Erie  Bank,  8  W.  &  S.  18;  Stair  v.  York  National  Bank, 
.5  P.  F.  Smith,  304;  Farmers  &  Mechanics'  National  Bank  v.  King,  57 
Pa.  St.  202;  Ilarrisburg  Bank  v.  Tyler,  3  W.  &  S.  373;  Bank  of  the 
United  States  v.  INIacalester,  9  Pa.  St.  475.  See  an  obiter  remark  in 
Miller  v.  Receiver  of  the  Franklin  Bank,  1  Paige,  444. 

578 


RECOVERY   OF   DEPOSIT    BY   TRUE   OWNER.  §  343 

last  note.     In  that  case,  tlic  court  even  went  so  far  as  to  say 
that,  when  the  true  owner  notified  the  bank  of  his   Even  after  a 
ownership    only  after  the  bank    had   been    served   the  depositor 
with  garnishee  process  in  a  suit  against  the  deposi-   jra?nTshee  on 
tor,  still   the   true   owner   had    the  superior   title,   no'iee^rom 
and  might  recover  the   money   in    proceedings  in   *'^^„g"'f,yij^ 
equity  against  the  bank  ;   for  the  attaching  credi-   it  for  him. 
tor  of  the  depositor  could  acquire  no  better  title  than  that 
of   the   depositor   himself,  and  the  depositor's  title  was  lia- 
ble  at   any   time   to   be   divested    by    notice   from   the   true 
owner  served  on  the  bank.     The  same  case  gives  the  bank 
some  comfort  by  the  statement  that,  if  either  claim-   „  , . 

•'  '  But  he  must 

ant  sues  the  bank,  the  court  will  have,  and  will   give  bank 

,  a  bond. 

exert,  as  a  general  rule,  the  power  to  compel  the 

plaintiff  to  execute  to  the  bank  a  sufficient  bond  of  indemnity 

as  a  preliminary  to  a  judgment  in  his  favor. 

(5 )  An  earlier  case  in  the  same  State,  commented  upon 
and  explained  in  the  last-named  case,  was  as  follows.  Pro- 
cess was  served  upon  the  bank  as  garnishee  of  The  bank 
the  nominal  depositor.  Judgment  was  rendered  "ake  it  upon 
in  favor  of  the  plaintiff.  The  bank,  after  service  iLfJelr^^ 
of  the  process,  paid  away  all  the  money  standing  ^"q\^'^qj,i 
to  the  defendant's  credit.  Upon  issue  of  scire  after  service. 
facias,  it  sought  to  avoid  its  responsibility,  on  the  ground 
that  the  money  was  not  really  that  of  this  depositor,  but 
that  of  an  undisclosed  principal,  who  found  no  fault  with 
the  subsequent  payments.  It  seemed  that  this  was  really 
the  case.  But  the  bank's  defence  was  not  allowed  to  pre- 
vail, upon  the  ground  that,  at  the  time  of  service  of  process, 
and  the  accruing  of  the  bank's  duty  to  hold  the  money,  the 
bank  did  not  know  that  the  fund  did  not  belong  absolutely 
to  the  depositor.  The  relations  of  all  the  parties  inter  se 
at  the  moment  of  service  became  fastened  definitively,  and 
remained  throughout  all  the  rest  of  the  proceedings  pre- 
cisely the  same.  The  bank  then  knew  only  the  depositor  ; 
its  duty  then  was  only  to  pay  to  him  or  his  order ;  the  gar- 
nishment which  found  him  the  apparent  owner  kept  him 
such,  without  regard  to  subsequent  knowledge  obtained  by  the 

579 


§  344  ADVERSE   CLAIM. 

bank.  Wherefore,  the  plaintiff  was  entitled  to  the  money, 
and  must,  under  the  circumstances,  take  it  from  the  fundis 
of  tlie  bank.'* 

(c)  In  Kansas  the  court  held  that,  where  a  person  holding 
money  in  a  (idueiary  capacity  deposited  it  in  his  own  personal 
deposit  account,  the  equitable  owner  could  maintain  his  claim 
to  it  against  a  creditor  of  the  depositor  who  had  garnishccd 
the  depositor's  general  account.^ 

§  844.    A     New    York    Case.       Checks    drawn.       Injunction. 

Presentment  of  first  Check.      Lunacy.      Payment   to    Committee. 

Presentment  of  Second   Check.  —  Certain   money   of 
A  payment  ■      t       •  i        i  7 

otherwise  13.  u'us  at  ki8  request  deposited  ivith  a  banJc  by  F"., 

mvaii'dated  u'ho  hoivever  did  so  in  his  own  name  to  the  credit 

verseciahn  ^^  ^  deposit  account  he  then  liad  with  the  bank, 

unknown  to  o'iving   to    B.    two    checks  for  the  amount,  which 

the  bank  at       '^  ^  ' 

the  time  of      B     February  22,  1869,  indorsed   and  delivered  to 

payment;  •  i  •  c        tt  ? 

and  a  bank     H.  as  part  Consideration  for  H.  s  promise  to  marry 

is  not  obliged   ,.  -p  ,.  ,,  ...,. 

to  look  into  him.  In  a  procecdmg  de  lunatico  inquirendo  in- 
ofVXecir  stituted  next  day,  it  was  adjudged  that  B.  was 
holder.  then,   and   for  six  months  had  been,  of  unsound 

The  suit  '  ' 

should  be       mind.     Pending  the  proceeding,  the  bank  was  en- 
bet  ween  the     .   .  . 
substantial      joincd  from   paying  over  the  money  to  any  one, 

and  on  March  31  was  ordered  to  pay  the  same 

to   B.'s    son,   the    committee    appointed,    and   on    April    15 

complied.      On   March   6,   the   larger   check   was   presented 

for   payment   and    refused.      On    March    8,    B.    married    H. 

On  August  28,  1871  the   smaller  check  was  presented  and 

refused.^      The  bank   could  not  pay   the  money  during  the 

injunction,  and  when  the  committee  presented  authority  from 

*  Jackson  v.  Bank  of  the  United  States,  10  Pa.  St.  61 ;  explained 
and  commented  on  in  Farmers  &  IMechanics'  National  Bank  v.  King,  57 
id.  202. 

5  Morrill  r.  Raymond,  28  Kans.  415;  citing  Central  National  Bank  of 
Baltimore  v.  Connecticut  Mutual  Life  Ins.  Co.,  104  U.  S.  54. 

1  §344.  Viets  v.  Union  National  Bank  of  Troy,  101  N.  Y.  563;  re- 
versing 31  Hun,  484,  and  citing  Van  Allen  v.  American  National  Bank, 
52  N.  Y.  1,  and  Bank  of  British  North  America  v.  Merchants'  National 
Bank,  91  N.  Y.  106.  The  judges  disagreed  as  to  the  grounds  of  the 
decision. 

680 


A   NEW   YORK   CASE.  §  344 

the  court  to  receive  the  money,  the  bank  acted  properly  in 
paying  to  one  who  had  apparent  authority  to  receive. 

"  It  must  be  conceded  that,  if  the  adjudication  of  lunacy 
was  in  force  at  the  time  the  payment  was  made,  it  was  a 
valid  and  legal  payment,  and  an  effectual  bar  to  any  claim 
by  the  plaintiff,  or  any  other  person  to  recover  the  money 
of  the  defendant." 

As  the  money  was  the  property  of  B.  when  deposited,  it 
remained  the  property  of  B.  and  the  payment  was  actually 
correct  and  legal.  Even  if  H.  had  an  equitable  claim,  it 
was  unknown  to  the  bank,  and  any  equitable  right  should 
be  enforced  against  the  committee,  not  against  the  bank, 
which  could  not  be  expected  to  look  into  the  equities  be- 
tween third  parties  before  paying  upon  order  of  the  court.* 

681 


CHAPTER   XXIV. 

ATTACHMENT   AND    INJUNCTION. 

§  345.     Analysis. 

§  346.  A  deposit  is  subject  to  attachment  by  the  creditors  of  the  owner, 

but  a  deposit  is  not  attachable  as  the  property  of  the  nominal  de- 
positor, if  it  is  shown  that  he  is  not  the  real  owner. 
\fter  certification  of  a  check,  the  amount  covered  by  it  is  beyond 

the  reach  of  creditors  of  the  drawer. 
And  wliere  a  check  is  an  assignment,  a  bank  may,  after  service,  pay 

checks  actually  drawn  before  service. 
Proceeds  of  collection  in  the  hands  of  a  sub-agent  may  be  attached 
by  a  creditor  of  the  real  owner. 
§  346  A.      The  attaching  creditor  is  in  no  better  position  than  his  debtor  as  to 

the  deposit. 
§  347.  Injunction  upon  bank. 

§  346.  Attachment.  —  A  creditor  of  him  who  has  title  to 
a  deposit  may  attach  the  same,  and  an  attachment  holds  all 
money  of  the  debtor  in  the  hands  of  the  trustee  or  bank  at 
the  time  of  service,  and  also  what  may  come  to  his  hands 
afterward,  at  any  time  before  judgment ;  and  it  makes  no 
difference  that  the  money  is  deposited  for  the  use  of  C.  un- 
less there  is  some  privity  of  contract  between  C.  and  the 
depositary,  for  a  deposit  does  not  become  C.'s  property  until 
his  assent  or  privity  arises.^ 

Borrowed  money  can  of  course  be  attached  as  well  as  any 
other,  for  it  is  the  property  of  the  borrower.^ 

A  depositor,  A.,  sometimes  places  money  of  B.  in  his  (A.'s) 
name,  with  B.'s  connivance,  to  prevent  the  creditors  of  B.  from 
reaching  it;  but  a  creditor  of  B.  will  not  be  prevented  from 
taking  the  fund,  if  he  can  show  that  it  is  really  B.'s  property, 

1  §  346.  Nicholson  v.  Crook,  56  iMd.  55.  See  First  National  Bank  v. 
.Taggers,  31  Md.  38;  Farmers  &  Merchants'  Bank  v.  Franklin  Bank,  31 
Md.  404;  People  v.  Johnson,  14  Til.  342;  Ivelly  v.  Roberts,  40  N.  Y.  432; 
Brown  v.  Foster,  4  Cush.  214 ;  Baker  v.  Moody,  1  Ala.  315. 

2  Fuller  V.  Randall,  1  Gray,  608. 

582 


ATTACHMENT.  §  346 


though  it  has  been  held  in  New  York  that  a  sheriff  could 
not  levy  on  such  a  deposit  as  though  it  were  B.'s.^ 

From  the  time  of  service  an  attachment  or  garnishment 
is  a  lien  that  no  act  of  the  bank  or  depositor  can  shake  off 
without  consent  of  the  creditor.* 

Of  course  the  attachment  can  only  affect  funds  belonging 
to  the  debtor,  and  if  a  check  has  been  certified  before  the 
service,  the  amount  covered  by  the  check  is  not  affected  by 
the  garnishment;  but  an  acceptance  away  from  the  bank  by 
the  cashier  is  not  good,  nor  a  promise  by  a  bank  clerk  that 
a  check  shall  be  paid,  and  such  acts  do  not  remove  any 
portion  of  a  deposit  from  the  attacks  of  creditors.^ 

Where  a  check  is  an  assignment  by  the  law  of  a  State, 
an  attachment  does  not  take  precedence  of  checks   drawn 
before  service,  and  the  bank  may  pay  such  checks   payment  of 
though  presented  after  service,^  but  it  should  be   service  of  ^"^ 
careful  to  assure  itself  that  the  check  is  not  of  a  attachment, 
subequent  drawing  and  merely  antedated. 

In  those  States,  as  Pennsylvania,  where  a  check  is  not  an 
assignment,  the  bank  cannot  pay  any  checks  after  service.'^ 

S.  in  England  drew  on  N.  in  New  York,  and  S.'s  banker, 
M.,  sent  it  to  the  F.  Bank  of  New  York  to  collect.     N.  began 
a  suit  against  S.,  and  when  the  draft  became  due   creditor  of 
paid  it,  and  at  once  attached  the  proceeds  in  the   depositor 

1  '  '■  mav  attach 

hands  of  F.     F.  claimed  that  the  money  was  due   proceeds  of 

,,.  ..,  T  IT  ,1  ,       collection  in 

from  it  to  M.,  its  principal,  and  could  not  be  at-  hands  of 
taclied  in  its  possession  as  the  money  of  S.  The  ^"  '*^^"  ' 
court  held,  however,  that  the  attachment  was  good.^ 

§  346  A.  An  attachment  or  judgment  lien  does  not  take 
precedence  of  a  prior  unrecorded  deed  or  mortgage,  whether 

8  Greenleaf  v.  Mumford,  50  Barb.  543.  But  see  Mechanics  &  Traders' 
Bank  v.  Dakin,  50  Barb.  593  (1867),  and  cases  cited;  Lawrence  v.  Bank 
of  Republic,  35  N.  Y.  320  (1867);  Mechanics  &  Traders'  Bank  v.  Dakin, 
28  How.  Pr.  502  (1864). 

*  National  Commercial  Bank  v.  Miller,  77  Ala.  168. 

5  Bullard  v.  Randall,  1  Gray,  G05;  Duncan  v.  Berlin,  60  N.  Y.  151. 

6  Nat.  Bank  v.  hid.  Bank.  Co.,  114  111.  483;  Reeve  v.  Smith,  113  111.  47. 

7  Harry  v.  Wood,  2  Miles,  327. 

8  Naser  v.  First  National  Bank,  36  Hun,  343. 

583 


§  347  ATTACHMENT   AND    INJUNCTION. 

the  creditor  had  or  had  not  notice  of  such  unrecorded  convey 
ance  at  the  time  of  levying  his  attachment,  or  docketing  his 
judgment.^  A  creditor  of  a  depositor,  who  attaches  money  to 
the  credit  of  his  debtor  in  bank,  is  in  no  better  condition  than 
the  depositor.  If  an  agent  mingle  his  principal's  money  with 
his  own,  so  that  it  cannot  be  followed,  the  principal  cannot  re- 
cover it  specifically  ;  but  the  agent  does  not  thereby  convert 
himself  into  a  mere  debtor  ;  the  principal  may  claim  from 
the  admixture- the  sum  which  belonged  to  him.  A  collector 
of  rents  deposited  money  of  his  principal  in  a  bank  in  his 
own  name  ;  it  was  attached  by  a  creditor  of  the  depositor, 
and  immediately  afterwards  notice  of  ownership,  &c.  was 
given  by  the  principal.  Held,  that  the  attaching  creditor 
stood  in  the  position  of  the  depositor,  and  could  recover 
only    what   the   depositor   could.''' 

A  deposit  by  a  corporation  in  a  bank,  is  a  debt  by  the 
bank  to  the  corporation,  and  is  liable  to  attachment  by  a 
judgment  creditor  of  the  corporation.  A  corporation  mak- 
ing a  deposit  is  on  the  same  footing  with  the  bank  as  is  an 
individual.  Wlicre  it  is  satisfactorily  shown  that  money  de- 
posited in  the  name  of  one  person  is  the  property  of  another, 
it  cannot  be  attached  as  the  property  of  the  depositor.^ 

A  creditor  who  is  a  party  to  a  trust  for  the  benefit  of 
creditors,  the  trustees  under  which  were  not  to  make  a 
payment  until  the  property  was  sold  and  the  trust  exe- 
cuted, has  no  legal  right  to  the  funds  in  the  hands  of  the 
trustee,  before  the  disposition  of  the  whole  trust  property.  A 
merely  equitable  right  is  not  attachable  by  trustee  process.* 

§  347.  Injunction  upon  Bank.  —  If  enjoined  from  paying,  of 
course  the  bank  must  wait  till  the  question  of  title  is  settled, 
before  paying.^ 

1  §  346  A.  First  National  Bank  v.  Hayzlett,  40  Towa,  659 ;  Lamberton 
V.  Merchants'  National  Bank  of  Winona,  24  ^Minn.  281. 

2  Farmers  &  Mechanics'  National  Bank  v.  King,  57  Pa.  St.  202, 
«  Farmers  &  Mechanics'  National  Bank  v.  Ryan,  64  Pa.  St.  236. 
*  Massachusetts  National  Bank  v.  Bullock,  120  Mass.  86. 

1  §  347.    Springfield  Marine  &  Fire  Ins  Co.  v.  Peck,  102  111.  265. 

584 


CHAPTER   XXV. 

CLEARING-HOUSE. 

§  348.  Analysis. 

§  349.   Daily  Routine. 

Effect  of  Clearing-Hodse  Rdles. 
§  350.   (1)  Non-members  not  bound,  unless  by  agreement  with  special  reference 
§  351.  to  the  rules,  (as  where  a  non-member  bank  employs  a  member 

§  351  d.    bank  to  make  exchanges  through  the  clearing-house  for  it,)  or  by 
a  course  of  dealing.    Nor  can  a  non-member  or  any  outside  party 
§  351.        take  advantage  of  the  rules,  and  the  liabilities  or  forfeitures  for 
which  they  provide. 
(2)  Members  are  bound  by  the  rules  as  by  contracts.     Unless  they  ex- 
§  352.        pressly  declare  that  common  law  rights  for  the  correction  of  mis- 
§  353.        takes,  &c.  are  forfeited  by  breaking  the  rules  of  the  clearing-house, 
such  rights  will  still  exist,  but  the  bank  in  fault  will  have  to  answer 
to  any  member  that  is  damaged  by  reason  of  the  breach  of  clear- 
ing usages  or  regulations. 
For  example,  a  dishonored  check  or  note  may  be  returned  after  the 
hour  set  in  the  clearing-house  rules,  (unless  the  rules  expressly 
declare  that  such  right  is  forfeited,)  and  if  the  bank  that  sent  the 
paper  through  the  clearing-house  has  not  altered  its  position  to  its 
injury,  in  consequence  of  there  having  been  no  return  within  the 
usual  hour,  no  damage  is  done,  and  the  rights  of  the  parties  are 
the  same  as  if  there  were  no  such  limitation  of  time.     But  if  the 
hour  set  for  the  return  of  paper  arrives  without  such  return,  and 
the  sending  bank  credits  or  pays  the  depositor  of  the  paper,  or  it 
has  in  any  way  altered  its  position,  or  may  be  at  any  loss  which 
might  possibly  have  been  avoided  by  a  return  within  the  hour,  the 
defaulting  bank  must  bear  the  loss. 
§  353.   Notes. 

Payment  of,  through  the  clearing-house. 

In  the  absence  of  evidence  of  uniform  usage  to  regard  the  presenta- 
tion of  notes  through  the  clearing-house  as  a  demand  for  immedi- 
ate payment,  just  like  checks,  such  presentment  is  equivalent  to 
leaving  the  note  for  collection  at  the  bank  where  payable.  The 
maker  has  all  the  business  hours  in  which  to  pay,  and  the  bank  is 
in  no  fault  if  it  returns  the  note  as  soon  as  it  is  sure  that  it  will 
not  be  paid. 
§  354.  If  there  are  insufficient  funds  to  pay  all  the  demands  at  one  clearing 

against  a  given  deposit,  the  bank  cannot  pay  any  of  them.  Quaere 
whether  it  would  not  be  better  to  establish  a  power  of  paying  those 
of  the  earliest  date  in  their  order,  as  far  as  possible.  When  the 
test  of  prior  presentment  fails,  some  other  should  be  provided. 

585 


§  349  CLEARING-HOUSE. 

§  349.  Payments  through  the  Clearing  House.  —  In  all  large 
cities  where  the  banking  business  is  sufficiently  considerable 
^  .,  to  demand  such  a  convenience,  "  clearing-houses  " 

IJailv  rou-  " 

tine  of  the  are  established.  The  main  purpose  of  these  is  to 
render  the  daily  settlements  of  the  banks  with  each 
other  simple  and  exjieditious.  The  substantial  characteristics 
of  the  plan  are  these.  At  a  certain  hour  every  morning, 
usually  at  ten  o'clock,  the  deputy  of  each  bank  attends  at  the 
room  of  the  clearing-house,  bringing  with  him  all  the  checks 
upon  other  banks  Mhich  have  been  received  by  his  own  bank 
since  the  same  hour  of  the  preceding  day.  Each  bank  has  its 
drawer  or  box  in  the  room,  and  the  messengers  of  all  the 
other  banks  distribute  all  the  checks  which  they  have  in  their 
possession,  placing  each  of  them  in  the  drawer  or  box  of  the 
particular  bank  upon  which  it  is  drawn.  Each  bank  is  then 
credited  on  the  books  of  the  clearing-house  with  the  amount 
of  checks  upon  other  banks  which  it  has  brought  in  for  col- 
lection, and  is  debited  with  the  amount  of  the  checks  drawn 
upon  it  which  all  the  other  banks  have  brought.  If  the  former 
amount  exceeds  the  latter,  the  bank  is  then  declared  to  have 
"  gained"  the  amount  of  the  excess ;  but  if  the  latter  amount 
exceeds  the  former,  the  bank  is  declared  to  have  "  lost "  the 
amount  of  the  difference.  It  is  obvious  that  the  sum  total  of 
the  losses  of  the  losing  banks  must  be  precisely  equal  to  the 
sum  total  of  the  gains  of  the  gaining  banks.  At  a  later  liour 
in  the  same  day  the  losing  banks  are  obliged  to  bring  into  the 
clearing-house  the  sums  which  they  have  respectively  lost ; 
and  shortly  afterward  the  gaining  banks  come  and  receive 
from  the  officers  of  the  clearing-house,  out  of  the  funds  thus 
furnished  by  the  losers,  the  amounts  of  their  respective  gains. 
In  this  manner  the  business  of  settling  the  daily  balances  and 
exchanges  between  the  several  banks  is  accomplished  witli  ex- 
traordinary rapidity,  accuracy,  and  cheapness.  The  compu- 
tation of  how  much  each  bank  has  brought  in  against  others, 
and  of  how  much  the  others  have  brought  in  against  it,  is 
performed  by  skilful  clerks  in  a  very  few  minutes.  So  soon 
as  it  is  finished,  an  officer  of  each  bank  takes  from  its  drawer 
or  box  all  the  checks  against  it  which  have  been  placed  therein 
586 


ROUTINE.  §  350 

by  the  other  banks,  and  carries  them  back  to  his  own  bank  to 
be  examined,  for  the  purpose  of  seeing  whether  or  not  any  of 
them  must  be  dishonored  by  reason  of  want  of  funds  of  the 
drawer.  The  casting  of  the  balances  at  the  clearing-house  is 
not  of  course,  as  it  would  be  impossible  that  it  should  be, 
binding  upon  any  bank  as  to  the  genuineness  or  the  honoring 
of  the  checks  which  are  placed  in  its  drawer,  and  which  pur- 
port to  be  honestly  drawn  upon  it  by  depositors  having  funds. 
A  time  is  therefore  set  within  which  each  bank  is  expected  to 
examine  all  such  checks,  and  to  return  such  as  it  refuses  to 
pay.  The  computation  already  made  at  the  clearing-house  is 
not  affected  by  the  repudiation  in  this  manner  of  checks  by 
any  bank.  But  each  check  before  being  placed  in  the  box  of 
the  drawee  bank  is  marked,  for  the  purpose  of  identification, 
with  the  name  of  the  bank  presenting  it  through  clearing  ; 
therefore  the  bank  on  which  it  is  drawn  and  which  refuses  to 
pay  it  is  able  at  once  to  send  it  back  to  the  bank  which 
brought  it  in,  and  to  demand  a  repayment  of  its  amount  to  be 
made.  If  the  repayment  is  refused  for  any  reason,  the  ques- 
tion lies  wholly  between  the  two  banks,  and  the  one  on  which 
the  check  was  drawn  has  no  means  of  satisfaction  afforded  by 
the  clearing-house,  but  must  bring  its  suit  directly  against  the 
other.i 

§  350.  Effect  of  Clearing-House  Rules.  —  A  clearing-house 
may  be  legally  incorporated ;  but  more  commonly  it  is  a  mere 
private  association  organized  among  the  banks  to  suit  their 
own  requirements  and  convenience.  Of  course  the  authority 
of  such  an  association  must  be  very  limited.  In  the  absence  of 
special  legislation  it  is  impotent  by  its  own  arbitrary  and  ori- 
ginal power  to  alter  any  obligation  of  the  common  law. 
Neither  has  it  any  authority  to  bind  banks  which  are  not 
parties  to  the  association  by  any  by-laws,  rules,  or  usages 
which  it  may  see  fit  to  establish.  Some  of  the  regulations  of 
the  clearing-house  are  embodied  in  by-laws,  others  are  simple 
rules  or  usages  which  are  adopted  and  tacitly  acquiesced  in 
by  the  members.     There  is  no  legal  distinction  between  these 

1  §  349.  Merchants'  National  Bank  v.  National  Bank  of  the  Common- 
wealth, 139  Mass.  513. 

587 


§  351  CLEARING-HOUSE. 

two  classes.  When  once  the  rule  or  usage  has  been  established 
by  satisfactory  proof,  it  is  as  binding  as  the  formal  by-law. 
The  only  jjractical  difference  is  in  the  greater  difficulty  which 
must  be  experienced  in  proving  with  accuracy  the  existence 
and  extent  of  the  unexpressed  custom. 

§  351.  Effect  on  Non-members. —  The  by-laws,  rules,  and 
usages  are  binding  only  upon  members  of  the  association. 
,.    ,.  ,.       No  outside  bank  is  under  any  degree  of  obligation 

^ot  binding  ji  ,i         i  i  l 

except  on  to  observo  them.  But,  on  the  other  hand,  no  out- 
uniessTv  sidc  bank  can  have  any  remedy  against  any  mem- 
TcZiTof  ber  of  the  association  for  a  breach  of  them.  They 
dealing.  ^^^^  -^^  ^j^^  nature  of  a  contract  to  which  the  out- 
sider is  no  party.  The  duty  of  adhering  to  them  runs  from 
each  of  the  members  to  each  and  all  the  rest,  but  to  no  other 
person  or  corporation  ;  at  least  unless  any  special  and  peculiar 
course  of  dealing  between  any  member  and  any  outside  indi- 
vidual has  operated  to  place  that  member  under  an  express 
and  exceptional  obligation  to  the  outsider  to  adhere  in  all 
matters  in  which  he  is  interested  to  the  regulations  of  the 
clearing-house.  Generally,  "  those  who  are  not  bound  by  such 
usages,  and  have  not  contracted  with  reference  to  them,  have 
no  right  to  avail  themselves  of  them  to  create  an  ol)ligation 
against  those  who  are  parties  to  their  adoption  and  bound  by 
them  inter  sese  only."  But  if  any  bank  or  person  not  a  mem- 
ber of  the  association  can  show  that,  by  virtue  either  of  an 
express  or  an  implied  understanding,  he  did  contract  with  a 
member  "  in  reference  to  "  such  usages,  he  may  hold  the  bank 
to  the  fulfilment  of  this  special  contract. 

In  general,  if  any  person  or  bank  employs  a  member  of  the 
association  to  transact  any  business,  such  employer  is  neither 
bound  by  the  rules,  nor  entitled  to  take  advantage  of  and  en- 
force them  as  against  other  members,  by  reason  of  the  fact 
that  the  agent  is  a  member.  The  fact  of  the  agency  does  not 
"  bring  the  case  within  the  operation  of  the  rule,  that  the  prin- 
cipal is  entitled  to  the  benefit  of  the  contract  of  the  agent, 
while  transacting  the  business  of  the  principal.  This  is  un- 
doubtedly true  as  to  all  the  legal  rights  acquired  by  the  agent 
for  the  benefit  of  the  principal ;  but "  the  clearing-house  rules 
588 


EFFECT   OP  RULES.  §  351 

are  "  a  mere  labor-saving  usage,  designed  for  the  exclusive 
benefit  of  the  agent,  the  adoption  of  which  could  not  affect 
the  principal  without  his  assent." 

(a)  The  foregoing  principles  were  laid  down  in  a  very  satis- 
factory opinion  delivered  by  the  Ciiicf  Justice  of  the  Supreme 
Court  of  New  Jersey ;  ^  and  the  facts  of  the  case  in  support 
and  explanation  of  which  they  were  enunciated  are  well  wortli 
a  brief  recital.  The  plaintiff  deposited  in  the  Bank  of  Com- 
merce in  New  York  City  a  check  drawn  on  the  defendant  bank, 
which  was  situated  in  New  Jersey.  The  defendant  of  course 
was  not  itself  a  member  of  the  New  York  clearing-house  ;  but 
it  had  as  its  agent  in  New  York  City  the  Ocean  Bank,  and  it 
was  wont  to  receive  and  pay  checks  drawn  upon  it  through  that 
bank.  That  bank  was  a  member  of  the  clearing-house,  and 
used  its  facilities  in  transacting  the  business  of  the  defendant 
bank.  The  check  in  question  came  from  the  Bank  of  Com- 
merce through  the  clearing-house  to  the  Ocean  Bank.  The 
rules  of  the  clearing-house  required  that  any  check  which  was 
not  to  be  honored  must  be  returned  before  ten  o'clock  a.  m.  of 
the  day  following  that  on  which  it  was  received  through  clear- 
ing ;  otherwise  the  bank  on  which  it  was  drawn  would  be  held 
to  pay  it.  If,  therefore,  this  check  had  been  drawn  directly  on 
the  Ocean  Bank,  that  bank  must  either  have  returned  it  before 
ten  o'clock  of  the  next  day,  or  it  must,  according  to  the  rules, 
have  paid  it.  It  was  returned  a  whole  day  later  than  this  limit, 
with  the  statement  that  it  could  not  be  paid  since  the  defend- 
ant had  no  funds  of  the  drawer.  The  plaintiff,  who  had  lost 
the  amount  of  the  check  by  the  intermediate  failure  of  the 
drawer,  sought  to  hold  the  defendant,  on  the  ground  that,  since 
its  agent  was  a  member  of  the  clearing-house  and  was  uniformly 
wont  to  adhere  to  its  rules  and  use  its  facilities  in  transacting 
the  defendant's  business,  therefore  the  defendant  was  itself 
answerable  for  the  agent's  breach  of  such  rules,  and  was  itself 
liable  to  suffer  for  such  breach  according  to  the  terms  pre- 
scribed by  those  rules.  Besides  laying  down  the  doctrines 
stated  in  the  three  preceding  paragraphs,  which  directly  mili- 
tated against  any  recovery  by  the  plaintiff,  the  court  further 

1  §  351.    Overman  v.  Hoboken  City  Bank,  1  Vroom,  01;  2  id.  563. 

689 


§  351  CLEARING-HOUSE. 

criticised  the  sufficiency  of  the  rule  or  usage  which  he  set  up, 
even  if  it  could  be  applicable  at  all  to  the  defendant  bank,  to 
cover  the  circumstances  of  this  case.  For  the  usage  appeared 
to  be  that,  where  a  check  is  presented  at  the  clearing-house 
"  to  a  bank  against  wliich  the  said  check  was  drawn,"  then  it 
must  be  returned  within  the  prescribed  time,  or  paid  by  such 
bank.  But  the  proof  in  this  case  showed  a  presentation  not 
"  to  the  bank  against  which  the  check  was  drawn,"  but  to  an 
agent.  "  This  is  an  essential  difference.  For  such  a  purpose 
the  agent  does  not  represent  the  principal.  The  usage,  if 
contemplating  a  presentation  to  the  principal,  may  be  reason- 
able, and  very  unreasonable  if  extending  to  the  agent.  The 
plaintiff  has  failed  to  bring  his  case  within  the  usage."  The 
soundness  of  these  remarks  will  be  seen  at  once,  if  we  suppose 
the  employing  bank,  the  defendant  in  this  case,  instead  of 
being  close  at  hand  in  New  Jersey,  to  have  been  situated  in 
Boston,  or  Chicago,  or  Philadelphia.  The  New  York  agent 
cannot  possibly  know  the  state  of  the  accounts  of  the  deposi- 
tors in  its  principal's  books.  It  cannot  properly  agree  or 
refuse  to  pay  checks  drawn  upon  the  principal,  and  some  days 
must  be  consumed  in  the  intercommunication  ;  meantime 
the  twenty-four  hour  rule,  which  appears  to  be  arbitrary, 
would  have  concluded  the  distant  bank  from  refusing  to  pay 
the  check  long  before  that  bank  was  aware  that  such  a  check 
had  been  drawn.  The  practical  reductio  ad  absurdum  is 
obvious. 

(6)  The  rights  of  a  depositor  in  a  member  bank  are  not 
affected  by  the  clearing  rules.^ 

(c)  Nor  can  he  take  advantage  of  them.  A  note  made 
payable  at  bank  A.  was  discounted  by  bank  B.  When  it  fell 
A  bank's  cus-  due,  B.  charged  the  amount  to  A.,  and  forwarded 
!ake'advan"°*  the  uotc,  through  thc  clearing-housc,  to  A.  for  pay- 
tase  of  the  ment.  The  teller  of  A.,  under  the  mistaken  impres- 
house  rules,  siou  that  the  maker  of  the  note  had  sufficient  funds 
on  deposit  for  its  payment,  stamped  upon  the  face  of  the  note 
the  word  "Paid."     Later  in  the  day,  discovering  his  error, 

'^  Merchants'  National  Bank  v.  National  Bank  of  the  Commonwealth, 
139  Mass.  513. 
690 


EFFECT   OF   RULES.  §  352 

he  sent  word  to  B.,  and  also  to  the  indorser  of  the  note.  The 
note  was  duly  protested.  B.  then  sued  the  indorser,  Avho, 
upon  the  foregoing  facts,  set  up  payment  by  A.,  and  endeav- 
ored to  take  advantage  of  the  clearing-house  rules.  But  the 
court  held  that  there  was  no  payment,  and  that  the  plaintiff 
should  recover.^  The  customers  of  a  bank  are  not  parties  to 
the  clearing-house  rules,  and  cannot  avail  themselves  of  any 
violation  of  such  regulations. 

(c?)   But  when  a  bank  which  is  not  a  member  of  the  clear- 
ing-house gives  authority  to  one  that  is  a  member   a  member 
to    act   for  it  in    making   exchanges    through    the   aKent'Yor^ 
clearing-house,  the  first  is  bound  as  to  third  par-   non-member, 
ties  by  the  acts  of  the  agent  bank  under  the  said  rules.* 

§  352.  Effect  of  Clearing-House  Rules  as  between  Members. — 
In  Massachusetts  ^  a  case  arose  between  two  Ijanks,  both 
members  of  the  clearing-house.  The  rule  on  which  They  are  in 
it  was  based  was  embodied  in  a  formal  vote  or  ofco"iftractf<, 
article  of  the  association,  in  the  words  following,  ti'^p^;  ^Tc'iare 
to  wit :    "  Whenever  checks  are  sent  through  the   distinctly 

"  that  com- 

clearing-house  which  are  not  good,  they  shall  be   mon  law 
returned  by  the  banks  receiving  the  same  to  the   forfeited,  a 

I        ^        r  1  •    1      J.1  'J  bank  violat- 

banks  from  which  they  were  received,  as  soon  as   jng  a  clear- 
it  shall  be  found  that  said  checks  are  not  good,   r^'wiirstiu 
and  in   no  case  shall  they  be  returned  after  one   ^'^'■'^  '^®  , 

•'  common  law 

o'clock."     The  plaintiff  bank  returned  the  check,   rights,  but 

,.,  ,  ,         1    n       1  1-111     "•'••st  answer 

as  dishonored,  to  the  defendant  bank,  which  had    for  any  dam- 
presented  it  at  clearing;   but  the  messenger  car-   tf another 
rying  the  check  did  not   arrive  at  the   rooms  of   "/le'vkiL-^' 
the  defendant   bank   until  five  or   seven    minutes   ^'°"- 
after   one  o'clock.      The    bank   sent  the   messenger   out   in 
time,  but   he   mistook    his   errand    and    went   to  the  wrong 
bank  first.     The  defendant   bank,  on   the  ground   that   the 
return  was  made  too  late,  under  the  rule,  refused  to  take  back 

'  Manufacturers'  National  Bank  v.  Thompson,  129  Mass.  438. 

*  Stuyvesant  Bank  v.  National  Mechanics'  Banking  Association,  7 
Lans.  197. 

1  §  352.  Merchants'  National  Bank  r.  Eagle  National  Bank,  101  Mass. 
281. 

591 


§  352  CLEARING-HOUSE. 

the  check  or  to  refund  its  amount.  It  did  not  appear,  how- 
ever, that  the  position  or  relations  of  the  defendant  hank  to 
the  drawer  had  undergone  any  change  in  the  few  minutes  that 
had  elapsed  since  one  o'clock.  It  would  have  heen  no  worse 
off  if  it  had  consented  to  receive  back  the  check  at  five  min- 
utes after  one,  than  it  would  have  been  had  it  been  obliged 
under  the  rule  to  receive  it  back  at  five  minutes  before  one. 
The  court  took  the  view  that  the  articles  of  association  were 
in  the  nature  of  a  contract  between  the  members.  If  the 
plaintiff  had  not  kept  the  check  so  long  that  it  would  at  com- 
mon law  be  held  to  have  adopted  it  and  assumed  to  pay  it, 
tlic  power  to  refuse  to  pay  it,  and  to  return  it,  still  existed, 
and  could  be  affected  by  the  rule  of  the  clearing-house  asso- 
ciation only  so  far  as  it  should  appear  that  the  defendant 
bank  had  suffered  actual  injury  by  reason  of  the  delay.  To 
the  extent  of  such  actual  injury  it  seems  that  the  defendant 
bank  might  be  entitled  to  a  set-off  against  the  sum  due  from 
it  on  the  check.  Or  it  might  pay  the  check,  and  then  sue  for 
damages  for  the  injury  caused  to  it  by  the  failure  of  the  re- 
turning bank  to  observe  the  terms  of  the  agreement  between 
them,  and  to  return  before  one  o'clock. 

This  case  was  subsequently  discussed  and  affirmed  by  the 
same  court.  The  check  in  this  later  case  was  returned  at 
half  past  one  o'clock,  with  a  statement  that  it  had  been  re- 
tained and  treated  as  good  under  a  mistake  of  fact,  and  that 
it  was  not  good.  The  bank  which  had  presented  the  check 
had  not  changed  its  position  in  any  respect  during  the  inter- 
vening half-liour,  and  therefore  really  suffered  nothing  by  the 
return  of  the  check.  The  court  said  that  the  limitation  of 
time  was  only  for  the  protection  of  the  presenting  bank ;  it 
was  the  establishment  of  a  certain  hour,  after  which  hour  the 
presenting  bank,  in  the  absence  of  notice  to  the  contrary, 
might  assume  the  check  to  be  good,  and  would  be  protected 
in  acting  on  that  assumption.  But  if  it  had  taken  no  action 
on  that  assumption,  then  it  had  no  need  of  protection,  and 
was  not  prejudiced  by  the  return  of  the  check.  For,  said  the 
court,  the  rule  of  the  clearing-house  does  not  say  that  the 
paying  bank  shall  have  no  riglit  of  reclamation  after  that 
692 


EFFECT   OF   RULES.  §  352 

hour,  and  slmll  thereafter  forfeit  or  lose  the  rij^hts  wliich  it 
would  otherwise  possess.  Upon  this  prround,  this  decision 
might,  perhaps,  be  distinguished  from  the  decision  in  Preston 
V.  Canadian  IJank  of  Commerce,^  which  otlierwise  certainly  is 
directly  contrary  to  the  Massachusetts  doctrine.^ 

It  is  also  said  that  the  mere  fact  that  the  presenting  bank 
has  credited  the  amount  of  the  check  to  the  depositor,  upon 
its  general  account  with  him,  does  not  constitute  such  an 
act  on  its  part  as  prevents  the  return  of  the  check  after  one 
o'clock.  This  fact  docs  not  make  the  depositor  liable  instead 
of  the  bank.  But  a])parently  it  might  be  different  if  the  bank 
had  given  any  fresh  and  original  credit  to  the  depositor  upon 
the  strength  of  the  check.^ 

In  Preston  v.  Canadian  Bank,  Judge  Blodgett  said  that 
Massachusetts  overlooked  the  right  of  the  parties  to  agree  on 
a  time  of  return.  Massachusetts  replies  that  she  The  essence 
does  not  overlook  such  right,  but  interprets  the  o^'^ecase. 
agreement  in  the  light  of  its  object  and  reason ;  viz.  to  pro- 
tect the  creditor  bank  in  any  action  it  may  take  in  treating 
the  check  as  paid  after  the  agreed  hour.  As,  for  example, 
by  paying  over  the  money  to  the  depositor  of  the  check ; 
but  as  the  creditor  bank  had  not  in  any  way  substantially 
altered  its  position,  the  money  paid  under  mistake  of  fact 
could  be  recovered. 

C.  deposited  collaterals  with  a  banking  firm  which  was  a 
member  of  the  Chicago  clearing-house,  arranging  to  draw 
checks  to  within  ten  per  cent  of  their  value.     On   ^,  „ 

'■  L.  S.  courts. 

August   5   he  drew  his   check  for  $4,000,   which  The  loss 

was   deposited  with  the  Canadian  Bank  of  Com-  {"hetmk "" 

merce  (also  a  member  of  the  clearing-house)  to  his  l^"/ ^'f^ 

credit,  and  went  into  the  exchanges  for  collection  comply  with 

1111-1  1  •  p     tlic  rules  to 

through  the  clearmg-house  on  the  mormng  ot  which  it  has 
August  6.     The  rules  required  each  member  to  pay     '^ 

2  23  Fed.  Rep.  179. 
'      8  Merchants'  National  Bank  ;-.  National  Bank  of  the  Commonwealth. 
139  Ma.ss.  513.     See  also  National  Exchange  Bank  v.  National  Bank  of 
North  America,  132  Mass.  143. 
4  Ibid. 

VOL.  I.  38  593 


§  352  CLEARING-HOUSE. 

its  balances  by  twelve  o'clock,  and  any  check  found  not  good 
when  returned  to  the  drawee  bank  was  to  be  returned  to  the 
bank  whicli  collected  it  through  the  clearing-house  by  half 
past  one  o'clock  of  the  same  day.  When  C.'s  check  was 
returned  from  the  clearing-house  to  the  firm,  the  collaterals 
were  deemed  sufficient  to  pay  this  and  other  checks  drawn  by 
him  on  the  firm ;  and  they  were  handed  over  to  the  book- 
keeper to  be  charged  upon  his  account.  At  forty-two  minutes 
past  one,  the  firm  heard  that  C.  had  failed,  when  a  second 
examination  of  his  account  disclosed  a  mistake  in  the  first, 
whereupon  the  check  was  sent  to  the  Canadian  Bank,  and 
payment  demanded  at  fifteen  minutes  before  two,  and  refused. 
Held  that  the  fii-m  could  not  recover  of  the  collecting  bank. 
The  parties  had  agreed  upon  the  time  within  which  mistakes 
could  be  corrected,  and  the  loss  must  fall  on  the  one  who  had 
failed  to  fulfil  the  contract.^ 

The  M.  bank,  at  nine  o'clock  one  morning,  produced 
$3,700.86  worth  of  checks  against  the  L.  bank,  and  the  lat- 
La.  ter  $4,967.57  worth  against  the  M.     Mutual  cred- 

Paynientsbv  j^g  were   given.     The   rule   of   the  clearing-house 

mutual  cred-  ^  " 

its  at  the        of  which  M.  and  L.  were  members  was  that  any 

clearing-  i        i  ,  i  •  c        i 

house  cannot  bank  unablc  to  pay  must  notify  the  manager  of  the 
after  hours  to  clcaring-house  and  the  other  banks  by  ten  o'clock, 
of'anothe"r*'"'  ^"d  hold  iu  trust  thc  checks  it  had  received  from 
bank.  other  banks  at   the   morning  exchange.     The  M. 

bank  on  the  morning  mentioned  above  could  not  pay ;  but, 
hoping  to  retrieve  its  fortunes,  neglected  to  give  notice, 
and,  acting  on  its  silence,  the  L.  credited  to  each  depositor 
the  checks  upon  M.  which  it  had  received  and  exchanged. 
The  court  held,  in  an  action  by  M.'s  receiver,  that  L.  had  a 
right  to  act  on  the  silence  of  M.,  and  that,  independently 
of  any  clearing-house  rules,  the  mutual  payment  of  checks  by 
The  essence  exchange  of  thosG  on  one  bank  against  those  on 
of  the  case.      ^^^^  q^j^^j.  ^^^^^   ^^^  ^^  rcvokcd  by  either  to  the 

detriment  of  the  other,  or  of  the  depositors  for  whom  that 
other  was  acting,  and  to  whom  it  had  given  credits.^ 

^  Preston  v.  Canadian  Rank  of  Commerce,  23  Fed.  Rep   179  (1883). 
^  Blaffer  v.  Louisiana  National  Bank,  35  La.  An.  1251  (188'3). 

594 


EFFECT  OF   RULES.  §  353 

If  the  rule  or  agreement  f^oes  so  far  as  to  declare  in  terms, 
as  was  the  fact  in  the  New  Jersey  case  cited  on  page  589,  that, 
if  the  returning  bank  does  not  return  before  the  hour  named, 
it  shall  altogether  forfeit  the  right  to  return  at  all,  and  shall 
be  hold  to  pay  the  amount  of  the  check,  the  entirely  different 
terms  of  the  contract  will  raise  an  entirely  different  issue. 
That  a  usage,  or  even  a  by-law,  to  this  effect  would  be  regarded 
as  in  derogation  of  the  common  law,  in  that  it  would  under- 
take to  make  a  bank  pay  the  check  of  a  drawer  who  had  no 
funds  to  his  credit,  and  that  therefore  the  plaintiff  would  be 
held  to  make  out  his  case  with  great  strictness,  may  be  gath- 
ered from  the  language  of  the  New  Jersey  court.  But  from 
the  same  case  it  may  also  be  gathered  that  if  the  plaintiff 
should  succeed  in  sufficiently  proving  his  case,  the  court  would 
not  deprive  him  of  a  favorable  decision.  Certainly  there  would 
seem  to  be  no  ground  on  which  the  courts  could  reasonably 
undertake  to  annul  a  positive  and  definite  agreement  vol- 
untarily entered  into  between  parties  of  high  intelligence, 
and  believed  to  work  to  the  common  advantage  of  all  con- 
cerned, 

A  usage  among  the  banks  in  the  clearing-house  at  London 
to  return  checks  at  any  time  before  five  o'clock  p.  m  ,  even 
if  they  have  been  cancelled  for  payment  in  the  usual  manner 
by  drawing  a  line  through  the  drawer's  signature,  provided 
the  words  "  Cancelled  by  mistake  "  are  noted  upon  them, 
has  been  recognized  by  the  English  courts  as  good  and 
binding.' 

§  853.    Payment  of  Notes  through  the  Clearing-house.  —  The 
rules  of  an  association  of  banks  organizing  a  clearing-house 
for   the    purpose    of   effecting   exchanges   between   A  note  sent 
themselves   at  one   time   and  place  daily,  and  the   clearing- 
payment  at  the  same  place  of  the  resulting  bal-  be'renlrn^d 
ances,  fixed  a  time   before    noon   for  making  ex-   a'^terthe 

'  o  hour  set  in 

changes  at  the  clearing-house,  and  a  time  between   the  rules. 
noon  and  one  o'clock  for  paying  balances  there.     The  prac- 
tice under  the  rules  was  for  the  exchanges  and  payments  to 
be   made  according   to  tickets  accompanying   vouchers  pre- 
^  Fernandez  v.  Glynu,  1  Camp.  426,  n. 

595 


§  353  CLEARING-HOUSE. 

scntod  for  exchange,  and  not  from  an  examination  of  the 
vonchers  themselves  in  detail.  The  rules  also  provided,  that 
errors  in  the  exchanges  should  be  adjusted  directly  between 
the  banks ;  and  that,  whenever  checks  which  were  not  good 
should  be  sent  through  the  clearing-house,  the  banks  receiv- 
ing Ihem  should  return  them  to  the  senders  as  soon  as  it 
should  be  found  that  they  were  not  good,  ''and  in  no  case  shall 
they  be  retained  after  one  o'clock."  Held,  in  the  absence  of 
evidence  of  a  uniform  custom  among  the  banks  which  were 
members  of  the  clearing-house,  to  treat  notes  the  same  as 
checks,  that  the  sending  of  a  note  through  the  clearing-house 
to  a  bank  at  which  it  was  payable  was  not  a  formal  demand 
for  immediate  payment  made  during  business  hours,  but  was 
equivalent  to  leaving  the  note  at  the  bank  for  collection  from 
the  maker  on  or  before  the  close  of  banking  hours ;  and  that 
the  payment  of  such  a  note  at  the  clearing-house  was  a  pro^ 
visional  payment  only,  which  became  complete  when  the  note 
was  paid  in  the  usual  and  ordinary  course  of  business,  and 
if  not  so  })aid  the  payment  at  the  clearing-house  was  to  be 
treated  as  a  payment  made  under  a  mistake  of  fact,  to  the 
same  extent  and  subject  to  the  same  right  of  reclamation, 
although  the  note  was  retained  until  after  one  o'clock,  as  if  it 
had  been  made  without  the  intervention  of  the  clearing-house. 
Held,  also,  that  even  if  the  bank  at  which  the  note  was  paya- 
ble had  funds  of  the  maker  of  the  note  on  deposit,  the  reten- 
tion of  the  note  until  after  one  o'clock  did  not  amount  to 
payment,  in  the  absence  of  evidence  that  the  maker  had 
authorized  the  bank  to  pay  his  notes  out  of  his  money  or 
deposit. 

"  The  sending  of  such  a  note  through  the  clearing-house,  not 
accompanied  by  any  special  demand  of  payment,  can  give  no 
greater  rights  to  the  bank  that  sends  it  than  if  the  note  had 
been  left  at  the  bank  where  payable,  without  any  demand  for 
payment,  or  any  instructions  in  relation  thereto.  In  such  a 
case  the  maker  would  have,  during  business  hours,  to  pay  the 
note,  and  the  bank  would  be  in  no  default  if  it  returned  the 
note  as  sooii  as  it  became  certain  it  would  not  be  paid. 

"  A  messenger  was  sent,  before  two  o'clock,  with  the  notes 
596 


NOTES   SENT   THROUGH    THE    CLEARING-HOUSE.  §  354 

to  each  of  the  defendant  banks,  reached  each  bank  before  it 
had  closed,  and  demanded  in  each  case  the  amount  which  the 
pUiintitf  had  paid  through  the  clearing-house,  and  tendered 
hack  the  note ;  but  payment  was  refused  by  the  defendant 
banks,  on  the  ground  that  the  notes  were  returned  too  late, 
that  they  should  have  been  returned  before  one  o'clock.  We 
fail  to  find  any  laches  on  the  part  of  the  plaintiff;  and,  on 
the  facts  presented,  no  injury  resulted  to  the  defendants  be- 
cause the  notes  were  not  returned  earlier.  Carrick,  Calvert, 
&  Co.  had  money  on  deposit  in  the  plaintiff  bank  that  day, 
but  not  enough  to  pay  all  their  notes  made  payable  that  day 
at  its  counter."  ^ 

§  354.  Checks  sent  through  the  Clearing-house.  —  Insufficient 
Funds.  —  The  payment  of  checks  may  be  affected  by  the  use 
of  the  clearing-house  in  one  important  particular.  Checks, 
as  has  been  seen,  must  be  paid  in  the  order  of  presentment. 
But  when  the  deputy  of  the  bank  takes  from  its  drawer  in  the 
clearing-house  all  the  checks  which  it  has  to  pay,  he  may  re- 
ceive a  considerable  number  of  checks  of  the  same  depositor. 
It  is  clear  that  there  can  be  no  priority  among  these.  They 
are  all  received  at  precisely  the  same  moment.  For  the 
order  in  which  they  are  placed'  in  the  drawer  has  nothing  to 
do  with  the  presentment  of  them  to  or  receipt  of  them  by  the 
bank,  indeed  is  in  nearly  all  cases  unknown  to  the  bank. 
The  bank  cannot  look  at  their  dates ;  for  priority  of  present- 
ment, not  of  date,  secures  priority  of  payment.  So  if  the  bank 
cannot  pay  all  the  checks  of  any  individual  depositor  then 
coming  through  clearing,  it  must  pay  none  of  them.  It  has 
no  legal  power  or  right  to  select  or  choose  from  among  them 
certain  ones  which  it  will  honor,  or  certain  ones  which  it  will 
dishonor.  All  or  none  must  be  paid.  Any  otlier  course  would 
render  the  bank  liable  to  the  holders  of  the  dishonored  paper. 
A  check  ])resented  at  the  counter  for  payment  nuist  be  paid 
at  once,  if  there  are  funds  enough  to  the  drawer's  credit  to 
pay  it  alone ;  but  if  it  is  sent  through  clearing  it  must  take  its 
chance  that  his  funds  shall  be  sufficient  to  pay  not  only  it,  but 

^  §  353.  National  Exchange  Bauk  t'.  National  Bank  of  North  America, 
132  Mass.  147,  151. 

697 


§  355  CLEARING-HOUSE. 

all  his  other  checks  which  shall  be  sent  through  clearing  on 
the  same  day  ;  and  failing  this,  it  must  be  dishonored. 

It  might  seem  advisable  to  incorporate  in  clearing-house 
transfers  a  rule,  that,  if  the  funds  of  a  depositor  are  insuffi- 
cient to  i)ay  the  whole  of  a  mass  of  checks  coming  against  it 
at  one  clearing,  the  bank  should  ])ay  those  of  earlier  date  so 
far  as  the  funds  will  go.  Such  a  rule,  though  leaving  some 
checks  out  in  the  cold,  would  seem  better,  as  creating  less 
disturbance  of  business  calculations,  than  to  refuse  payment 
of  the  whole  group.  If  a  hundred  or  a  thousand  men  try  to 
enter  a  hall  and  get  crowded  in  the  way  so  that  none  can 
enter,  a  benevolent  policeman  would  not  make  this  an  excuse 
for  sending  them  all  away  entirely,  but  would  straighten  out 
the  column,  and  let  them  enter  in  file,  so  far  as  the  hall  would 
hold  them. 

That  the  system  of  presentment  through  the  clearing-house 
is  a  legal  presentment  for  payment,  to  the  bank  on  which  the 
check  is  drawn,  —  a  matter  which  it  would  seem  could  never 
be  doubted,  —  has  been  specifically  ruled  in  England.^ 

S  355.    Appropriation   of  Payments  made  by  the  Bank.  —  At 

any  time  it  is  only  the  Ijalancc  of  all  the  items  up  to  that 

date  that  the  customer  can  recover  from  the  bank, 

The  first  sum  .    ,     ,  i  i  •        i        i  m         tj.  • 

drawn  ap-  or  for  wliicli  hc  cau  draw  his  checks  upon  it.  it  is 
ESsum'*"  the  first  item  on  the  debit  side  that  is  discharged 
deposited.  ^^,  reduced  by  the  first  item  on  the  credit  side,  with- 
out regard  to  the  identity  or  disparity  of  any  particular  sums.^ 
Simple  as  this  principle  appears,  it  is  sometimes  the  only 
thread  which  can  show  the  way  out  of  complicated  laby- 
rinths, as  is  well  shown  by  the  cited  case  of  Devaynes  v.  Noble. 
There  the  partner  in  a  large  banking-house  died.  The  busi- 
ness was  continued  without  any  real,  or  even  formal  change. 
Some  customers  knew  of  the  death,  some  did  not.  The  daily 
course  of  the  business  continued  in  all  respects  as  before,  till 

1  §  354.    Reynolds  v.  Chettle,  2  Camp.  596. 

1  §  355.    Devaynes  v.  Noble,  1  Mar.  541 ;  Bodenham  v.  Piirchas,  2  Barn. 
&  Aid.  30;  Henniker  v.  Wigg,  4  Q.  B.  792;  Concord  v.  Concord  Bank, 
IG  N.  H.  26;  Commercial  Bank  of  Albany  v.  Hughes,  17  Wend.  94;  Clay- 
ton's Case,  1  Mer.  608. 
598 


APPUOl'UIATION    OF   PAYMENTS.  §  355 

the  house  failed.     Then  various  customers  sou^^ht  to  hohl  the 
estate  of  the  deceased  ])aitner  to  satisfy  their  deficjts.     The 
question  was  on  what  principle  the  accounts  should  be  made 
up ;   for  no  hesitation  was  expressed  as  to  the  necessity  of 
subjecting  the  estate  to  meet  the  unsatisfied  claims  of  all  per- 
sons who  were  customers  at   the  time  of   the  death  of   the 
deceased.     Since  then  some  had  increased,  ami  others  had 
decreased,  the  amount  of  their  deposits ;  members  of  each  of 
these  classes  had  received  credits  to  the  amount  of  their  bal- 
ances at  the  time  of  the  death ;  other  members  had  not.     The 
arguments  of   counsel  were  very   long  and    ingenious;    the 
court    gave  the   matter  the  most  serious  consideration,  but 
regarded  no  solution  as  possible  save  that  of  a  simple  run- 
ning account.     It  decreed  that  every  payment  made  to  each 
customer  since  the  death  should  be  applied  in  reduction  of  the 
debt  or  balance  owing  to  that  customer  at  the  time  of  the 
death,  and  this  equally  (1)  where  the  customer  had  since 
made  no  deposit,  but  simply  drawn  checks;  (2)  where  the 
customer  had  continued  to  deal  with  the  firm  depositing  and 
checking,  but  on  the  whole  increasing  his  balance ;  and  (3) 
where,  dealing  in  like  manner,  he  had  decreased  his  balance. 
The  principle  was  stated  to  be  unalterable,  that  each  payment 
to  the  customer  should  be  referred  back  and  set  against  the 
earliest  indebtedness  to  him ;  that  the  rule  of  law,  sometimes 
laid  down,  that,  if  at  the  time  of  the  payment  the  debtor 
neglects  to  appropriate  it,  the  creditor  may  afterwards  appro- 
priate it  to  suit  his  own  wishes,  cannot  be  allowed  to  govern 
in  cases  of  banking ;  but  that  in  this  business,  in  the  absence 
of   express  contemporary  arrangement  or  understanding,  it 
will  be  considered  that  the  appropriation  of  each  payment  to 
the  discharge  of  the  earliest  then  subsisting  indebtedness  is 
in  fact  made  by  the  very  act  of  setting  down  the  two  items  in 
their  order  in  the  account.     To  the  same  purport   Clayton's 
also  was  Clayton's  Case,  where,  however,  the  inten-     *'*^' 
tion  of  the  depositor  was  considered  to  be  more  clearly  estab- 
lished, because,  after  the  death  of  a  partner  in  the  banking 
firm,  the  depositor  continued  to  draw  checks  against  the  sum 
to  his  credit  at  the  time  of  the  death. 

599 


§  355  CLEARING-HOUSE. 

A  lawyer  deposited  on  general  account  in  his  own  name 
£5,000  of  his  client's  money  ;  after  drawing  more  than  £5,000 
Even  thoui,'ii  '^'1*^  the  balance  he  had  previous  to  that  deposit,  he 
Fundslfelu  *^'^'^  leaving  a  deposit  of  £2,700.  This  the  client 
trust.  claimed  as  a  trust  fund,  but  the  court  held  that  the 

payments  by  the  bank  must  be  appropriated  to  the  sums  paid 
in  by  the  depositoi-  in  the  order  of  the  latter,  and  therefore  the 
trust  money  had  been  all  drawn  out.^  So  far  as  the  report 
shows,  no  effort  was  made  to  see  if  the  payments  could  be 
accounted  for  without  subtracting  from  the  trust  money ;  the 
accounts  were  lumped  and  the  rule  of  Clayton's  Case  appears 
to  have  been  strictly  applied. 

But  in  Maine  it  has  been  held  that,  if  one  draws  a  check 

.  against  a  fund  composed  partly  of  his  own  money 

Contra  as  to  and  partly  of  money  of  another,  the  presumption  is 
*'^"*^'  that  he  is  drawing  his  own  money .^ 

And  in  England  it  has  been  held  that,  where  money  is  held 
by  a  person  in  a  iiduciary  capacity,  though  not  strictly  as  a 
trustee,  if  he  mixes  it  with  his  own  in  bank  he  will  be  taken 
to  have  drawn  his  own  in  preference  to  the  trust  money,  and 
the  rule  in  Clayton's  Case  will  not  apply.* 

2  Brown  v.  Adams,  L.  R.  4  Ch.  App.  764  (1869) ;  PenneU  v.  Deffell, 
4  D.  M.  &  G.  ;372. 

8  Hall  V.  Otis,  77  Me.  122. 

*  Re  Hallett's  Estate,  KuatchbuU  v.  Ilallett,  13  Ch.  D.  696  (1879). 
600 


CHAPTER  XXYI. 

OVERDRAFTS. 

§  350.   Analysis. 

Are  irregular  loans.     Power  to  grant. 
§  357.  Bank  officers  have  no  inherent  power  to  make  such  loans,  and 

even  a  usage  to  the  effect  of  giving  such  power  is  bad. 
§  358.  It  is  part  of  the  management,  and  belongs  only  to  the  directors. 

May  be  a  fraud  upon  the  holder  of  an  overdraft,  if  he  is  not  in- 
formed of  its  character  at  the  time  he  accepts. 
§  359.  But  not  on  the  bank,  for  it  has  means  of  ascertaining  the  fact  as 

to  sufficiency  of  funds  by  ordinary  diligence,  and  if  it  relies  on 
the  representation  of  sufficient  funds  implied  by  drawing  a  check, 
it  is  its  own  fully.  This  view,  however,  seems  not  to  be  without 
dissent. 
§  300.  The  bank  may  recover  from  the  drawer  any  over-payment  made 
upon  his  order. 

§  357.  Overdrafts.  —  It  IS  not  ail  iincommon  thing  for  a 
depositor  to  undertake  to  overdraw  his  balance ;  and  if  he 
be  a  depositor  in  good  standing  and  repute,  and  a  good 
customer  of  the  bank,  his  overdraft  may  very  probably  be 
honored  by  it.  Of  course  such  a  payment  is  made  by  the 
bank  wholly  upon  its  own  risk,  and  in  sole  reliance  on  the 
ability  of  the  drawer  to  make  remuneration.  In  fact,  it  is 
nothing  else  but  a  loan,  and  a  loan  of  a  very  dangerous 
and  irregular  description,  wherein  the  bank  has  Are  loans 
no  security  whatsoever  beyond  the  right  of  action  '""^s^^*'"- 
against  the  drawer.  If  a  cashier,  not  authorized,  as  cashiers 
seldom  are,  to  loan  the  funds  of  the  bank,  or  if  the  paying 
teller,  who  probably  never  has  such  authority,  pay  the  over- 
draft of  a  customer  without  specific  power  from  the  govern- 
ment of  the  bank,  but  simply  of  his  own  individual  motion, 
his  act  is,  in  the  eye  of  the  law,  a  breach  of  his  trust.  They 
have  used  the  funds  and  property  of  the  bank  in  a  manner 
which  the  law  does  not  authorize,  and  in  which  they  have 
not  even  a  color  of  right  to  use  them.     They  have  imperilled 

C.01 


OVERDRAFTS. 


tlie  safety  of  corporate  money  by  loaning  it,  and  the  fact  that 
it  is  to  a  customer  whom  they  believe  to  be  rich  and  honest, 
and  a  man  whom  it  is  desirable  to  favor,  does  not  prevent 
the  transaction  fiom  being  a  transgression  beyond  the  limits 
of  their  power  and  duties. ^  They  probably  would  not  dream 
of  discounting  of  their  own  sole  motion  the  same  customer's 
note,  or  making  him  a  formal  loan,  even  with  security  ;  yet 
here  they  in  fact  make  him  a  very  informal  and  irregular 
Usage  for  '  loan  without  security.  The  fact  that  in  banking 
officer  to        business  such  things  are  often  done,  and  that  their 

permit  over-  <=  .  •    ,    j 

draft  bad.  truc  character  is  hardly  recognized  or  appreciated 
by  the  actors  in  them,  is  perhaps  a  moral  extenuation,  but 
it  is  certainly  no  legal  excuse.  The  language  of  the  adjudi- 
cated cases  is  not  capable  of  being  explained  away.  Such  a 
course  of  dealing,  long  carried  on  by  a  cashier  or  teller  wdth 
the  knowledge  and  express  or  tacit  approval  of  the  bank 
direction,  may  possibly  relieve  him  from  liability  to  them. 
This  is  another  and  collateral  question,  by  no  means  devoid 
of  doubt  and  difficulty.  But  however  such  a  usage  or  course 
of  dealing  may  operate  between  the  individual  officer  and  the 
bank  government,  it  is  not  allowed  to  be  introduced  in  any 
other  connection,  for  the  purpose  of  rendering  valid  by  virtue 
of  business  usage  an  act  which  the  law  directly  makes  wrong- 
ful. Evidence  of  such  a  usage  wall  be  ruled  out.  For  how- 
ever common  the  practice  might  be  shown  to  be,  it  is  yet  a 
usage  intrinsically  bad  and  illegal,  and  which  no  court  of  jus- 
tice will  recognize.^ 

§  358.  Overdrafts  may  be  arranged  for.  —  Of  COUrse,  how- 
ever, there  is  a  power  in  the  bank  to  allow  overdrafts.  By 
Directors  negotiating  with  the  authorized  and  proper  officials, 
may  allow,  j^  customcr  may  make  a  legal  and  binding  arrange- 
ment by  which  his  overdrafts,  to  a  certain  amount  named  and 
under  the  circumstances  agreed  upon,  shall  be  honored.  The 
dealing  is  in  the  nature  of  a  loan ;  it  is  placing  money  at  his 
dispo'sal  and  control.     There  may  be  a  standing  agreement, 

1  §  3.57.    p:ichelberger  v.  Finley,  7  liar.  &  J.  381 ;  Bank  of  St.  Mary's 
V.  Calder,  3  Strobh.  403;  Lancaster  Bank  v.  Woodward,  IS  Pa.  St.  357. 
^  Lancaster  Bank  v.  Woodward,  18  Pa.  St.  357. 
602 


ovp:rdrafts.  §  359 

binding  on  the  bank,  for  a  definite  period.  Or  there  may  be 
a  mere  naked  permission,  revocable  at  will.  In  the  latter 
case  it  is  not  what  is  termed  an  "  authority  "  to  overdraw. 
The  bank  is  under  no  obligation  to  honor  tlie  drawer's  check, 
but  may  at  any  time  refuse  to  do  so.  Neither  is  the  drawer 
warranted  in  stating  absolutely,  solely  on  the  strength  of 
such  an  arrangement,  that  his  check  is  "  good."  ^ 

A  mining  company  may  legally  enter  into  an  arrangement 
with  a  bank  to  pay  its  over-checks,  and  where  such  checks 
are  customarily  signed  by  the  president  and  secretary  with- 
out objection,  the  bank  may  assume  that  they  are  duly 
authorized.^ 

A  depositor  notified  the  bank  not  to  allow  overdraft  beyond 
a  certain  amount.  Checks  however  were  drawn  by  an  author- 
ized agent  beyond  the  limit.  Held,  that  such  notice  did  not 
defeat  the  rights  of  the  holders  of  the  checks,  nor  the  right 
of  the  bank  to  pay  and  charge  the  depositor.'^ 

§  359.  Overdraft  may  be  a  Fraud.  —  There  has  been  some 
inclination  to  regard  the  drawing  of  overdrafts  by  depositors, 
without  warning  to  or  understanding  wdth  the  bank,  as  a 
proceeding  improper,  and  even  fraudulent,  on  the  part  of  the 
depositor.!  It  has  been  w^ell  said  that  a  bank  must  often  be 
obliged  to  put  some  reasonable  amount  of  confidence  in  a 
depositor.  And  what  confidence  is  more  reasonable  than 
that  his  drafts  are  drawn  bona  fide  against  his  deposits,  un- 
less the  bank  has  been  notified  in  some  manner  to  expect 
the  contrary.  Such  a  rule  would  probably  be  regarded  as 
severe  by  the  business  community.  But  it  has  been  said, 
obiter^  by  the  Supreme  Court  of  the  United  States,  discussing 
the  difference  between  a  bill  of  exchange  and  a  check,  that 
the  drawing  of  a  check,  payable  instantly,  by  a  drawer  wiio 
has  no  funds,  is  a  fraud.^     This  is  hardly  a  stronger  case 

1  §  358.    Ballard  v.  Fuller,  32  Barb.  68. 

2  Mining  Company  v.  Anglo-California  Bank,  104  U.  S.  192  (Novem- 
ber, 1887). 

8  Bremer  County  Bank  v.  Mores,  3-1  N.  W.  8G3  (Iowa). 
^  §  359.    Peterson  v.  Union  National  Bank,  52  Pa.  ISt.  206 ;  True  v. 
Thomas,  16  Me.  36. 

2  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  at  p.  647. 

603 


§  359  OVERDRAFTS. 

than  the  overdrawing  by  a  drawer  who  is  known  to  have  funds, 
which  the  bank,  relying  uj)on  him,  may  suppose  to  be  sulhcient, 
and  so  be  carelessly  misled  into  an  erroneous  payment.^ 

It  is  clearly  not  the  drawing,  but  the  issuing,  that  may 
be  fraudulent.  And  it  seems  very  doubtful  whether  the 
Supreme  Court  had  any  thought  of  saying  that  drawing  a 
check  with  no  funds  or  insulhcicnt  funds,  can  be  a  fraud  on 
the  hank.  'J'here  are  in  the  bank  full  means  of  information ; 
it  has  no  right  to  rely  on  the  representation  of  the  drawer 
as  to  a  fact  concerning  which  it  has  even  superior  oppor- 
tunities of  knowledge.  The  bank  must  be  held  to  have  notice 
of  what  its  books  show,  and  no  one  has  a  right  to  rely  on  the 
representation  of  another,  the  falsity  of  which  is  known,  and 
if  the  truth  or  falsity  of  the  statements  might  have  been 
tested  by  ordinary  vigilance  and  attention,  it  is  the  bank's 
own  folly  if  it  neglects  to  do  so.* 

But  a  check-holder  has  not  equal  means  of  information; 
he  has  a  right  to  suppose  that  a  check  is  drawn  against  funds 
(for  that  is  the  presumption  of  law)  unless  otherwise  in- 
formed at  the  time  he  accepts  it,  and  it  has  therefore  been 
lield  in  England  that  if  a  sale  of  goods  be  made  for  ready 
money,  and  the  buyer  gives  his  check  to  the  seller,  knowing 
that  he  has  not  funds  in  the  bank  sufficient  to  meet  it,  he 
thereby  does  what  is  equivalent  to  a  false  representation  of 
a  material  fact.  This  will  vitiate  the  sale,  and  entitle  the 
seller  to  rescind  the  contract.  The  rule  is  asserted  with  con- 
siderable rigor,  for  it  is  declared  to  be  applicable  even  though 
the  drawer,  at  the  time  of  giving  the  check  not  drawn  against 
actual  funds  in  the  bank  to  his  credit,  nevertheless  had  rea- 
sonable cause  to  suppose  that  it  would  be  paid.^  The  fraudu- 
lent character  of  the  transaction  in  this  case  is  only  in  its 
aspect  towards  the  seller.  Whether  or  not  there  is  any 
fraudulent  aspect  as  towards  the  bank  is  quite  a  different 
question. 

8  Tetersou  v.  Union  National  Bank,  52  Pa.  St.  206. 
^  Moore  v.  Turbeville,  2  I'.ibb,  602;  Saunders  v.  Hatterman,  2  Ired. 
32 ;  Farrar  v.  Alston,  1  Dev.  09. 

^  Loughnau  v.  Barry,  6  Ir.  K.  C.  L.  457. 
604 


OVERDRAFTS.  §  360 

There  is  never  fraud  upon  one  merely  by  his  reliance  on 
what  he  had  no  right  to  rely  on.  The  bank  has  even  better 
means  of  information  as  to  the  state  of  the  drawer's  deposit 
than  the  drawer  has  himself,  since  he  may  not  know  what 
checks  have  been  presented  nor  collections  made  for  him. 
It  seems  clear,  therefore,  that  the  bank  has  no  right  to  re- 
gard a  check  as  an  affirmation  of  funds  in  respect  to  itself, 
though  it  is  clearly  such  an  affirmation  as  to  an  innocent 
holder.  The  case  of  Peterson  v.  Union  National  Bank  clearly 
decides  that  drawing  a  check  in  the  absence  of  funds  is  a 
fraud  on  the  bank  as  well  as  on  the  holder,  but  it  seems  mani- 
fest that  the  decision  on  the  facts  required  no  such  broad 
statement.  The  drawer  and  holder  both  knew  there  were  no 
funds.  The  bank  did  not  pay  the  check,  but  credited  the 
holder  and  charged  the  drawer.  The  drawer  had  absconded 
before  the  check  was  presented,  and  the  holder  knew  this  fact. 
Now,  although  a  check  does  not  seem  to  us  an  affirmation  to 
the  hank  of  funds  in  the  bank  at  the  time  of  presenting,  it  seems 
equally  clear  that  it  is  an  affirmation  to  the  bank  that,  if 
there  are  no  funds,  or  insufficient  funds,  and  the  bank  honors 
the  check,  the  drawer  will  reimburse  the  bank ;  and  if  one 
draws  a  check,  or  presents  it,  knowing  that  there  are  no  funds, 
that  the  remedy  over  of  the  bank  against  the  drawer  is  worth- 
less, the  fraud  is  very  clear.  Such  was  the  case  sometimes 
cited  for  the  very  different  doctrine  that  drawing  a  check 
without  funds  is  a  fraud  on  the  bank. 

The  case  of  True  v.  Thomas  decided  that,  when  the  drawer 
has  no  reasonable  expectation  that  his  check  will  be  honored, 
the  drawing  and  issuing  is  so  far  a  fraud  on  the  holder  that 
he  is  relieved  of  the  duty  of  demand  and  notice  so  far  as  the 
drawer  himself  is  concerned,  and  may  bring  suit  against  him 
at  once.  The  question  of  fraud  on  the  bank  was  not  raised  in 
that  case. 

§  360.    Bank    may    recover    Overdraft    from    the    Drawer.  — 
A     bank    can    recover    the    amount   of    an    overdraft    from 
the  drawer,^  or  from  one  who  has  received  it  with  knowl- 
edge  of   a  fraudulent   overdrawing   and   without   considera- 
1  §  360.    Franklin  Bank  v.  Byram,  39  Me.  489. 

605 


§  360  OVERDRAFTS. 

tion ;  -  and  if  money  has  been  by  overdraft  fraudulently  ob- 
tained and  deposited  elsewhere,  it  can  be  followed  and 
claimed.^ 

The  view  noticed  above  —  that  it  is  wrongful  in  the  deposi- 
tor to  overdraw  —  leads  to  the  conclusion  that  the  bank  may, 
if  it  choose,  sue  him  in  tort  to  recover  the  amount  which  it 
has  paid  on  his  overdraft.  There  is  no  doubt  that  it  may  sue 
him  in  indebitatus  assumpsit  for  money  paid  to  his  use.  A 
suit  brought  in  this  shape,  however,  operates  as  a  waiver  of 
the  tort,  and  in  it  the  depositor  may  avail  himself  of  all  his 
general  rights  of  set-off.* 

2  Mechanics'  Bank  v.  Levy,  3  Paige,  606. 

2  Tradesman's  Bank  v.  Merritt,  1  Paige,  302. 

*  Bank  of  the  United  States  v.  Macalester,  9  Pa.  St.  475. 

606 


CHAPTER  XXVII. 


CHECKS     IN    GENERAL. 


§  3G2.  Analysis. 

Definition,  Nature,  Essentials,  Kinds. 
Definition. 

A  check  is  an  unconditional  order  on  a  bank  or  banker  to  pay  a 
specified  sum  of  money  to  a  person  named,  or  order,  or  to  bearer, 
on  demand. 
A  bill  of  exchange  may  be  on  demand  or  not,  on  a  banker  or  not; 
§  373.      a  clieck  is  an  instrument  combining  these   two  attributes,  from 
which  tlie  law  presumes  that  it  is  drawn  against  funds  actually 
deposited.     It  may  be  more  philosophic  to  treat  bills  as  the  genus 
and  checks  a  species,  but  it  will  conduce  to  clearness  to  use  the 
words  exclusively,  which  we  shall  do. 
Contrast  with  Bills. 


§§  378-380. 


Checks. 


1.  Never  have  grace. 

2.  Must    be   drawn    upon   a 

bank. 

3.  Holder    may    sue    drawee 

before  acceptance.!?) 

4.  Drawer  not  discharged  by 

laches  in  presentment, 
except  so  far  as  actu- 
ally damaged  thereby. 
Drawer  must  check  against 
funds,  or  he  is  guilty  of 
fraud. 

6.  Holder  cannot  demand  ac- 

ceptance, but  only  pay- 
ment. 

7.  Payee  of  a  check  does  not 

gain  any  time  by  giving 
it  to  a  bank  to  collect. 

8.  Death  of  drawer  is  held  to 

revoke.  (1) 


Bills. 

May  or  may  not. 

May  or  may  not  be  so  drawn. 

Holder  cannot  sue  drawee  on  a  bill 

before  its  acceptance. 
Drawer  absolutely  discharged  by  such 

laches. 


Drawer  need  not  have  funds  in  draw- 
ee's hands. 

A  bill  is  of  right  presentable  for  ac- 
ceptance. 

Payee  of  a  bill  gains  one  day  by  so 
doing. 

Death  of  drawer  does  not  affect  the  du- 
ties of  the  other  parties ;  the  drawee 
should  accept  just  the  same. 

607 


§  802  CHECKS    IN    GENERAL. 

An  Instrument  (I.)  drawn  upon  a  Banker,  and  payable  at  a  future 
§  381.  day  certain,  is  the  subject  of  much  conflict.    Tiie  better  opinion  is, 

§§  382-386.    that  it  has  grace.     It  is  certainly  a  very  different  instrument  from 
a  post-dated   check,  which,  after  the  arrival  of  its  date,  is  the 
same  as  an  ordinary  check,  and  payable  at  any  time  within  rea- 
sonable limits,  while  I.  is  payable  upon  one  fixed  day.     Whether 
I.    should  be   considered   presentable   for   acceptance  like  a  bill 
before  its  maturity,  or  unpresentable  like  a  post-dated  check,  may 
be  open  to  question,  tliougli  there  seems  to  be  no  reason  as  yet 
§  367  b.     given  sufficient  for  considering  I.   anything  other  than  a  bill  of 
exchange  upon  a  banker,  except  in  those  cases  where  usage  con- 
trols. 
When  the  usages  of  business  men  are  not  sufficiently  clear  to  guide 
decision  in  such  matters,  simplicity  and  consistency  in  the  law 
sliould  be  regarded,  and  in  this  case  they  place  I.  on  the  list  of 
bills,  and  give  it  grace. 
§  363.  Description  and  Elements  of  a  Check. 

(a)  Indorsement. 

(b)  Form  of  check  so  unusual  as  to  be  suspicious,  bank  should  have 

time  for  inquiry. 

(c)  Distinction  between  refusal  to  pay  and  request  for  delay. 
§  364.          Essentials. 

§  365.  Signature.     §§  430,  4-32  et  seq. 

(a)  Representative  additions,  agent,  &c.,  whose  check. 
{b)        When  the  check  discloses  the  name  of  the  principal, 
(c)       Parol  evidence  admissible  to  show  who  is  bound. 
§  366.  Sum  certain,  "  £,"  "  §,"  written  sum  controls,  &c. 

§  367.  Address 

To  cashier, 
(a)  Must  be  to  a  bank  or  banker  still  doing  business.     See  §    4. 
(6)  Writing  controls. 

(c)  Parol  admissible  to  show  who  is  the  drawee. 
Date. 

On  demand. 
Payee. 

(a)  Fictitious. 
Words  of  ordering. 
Surplusage. 

Presumptively  drawn  against  a  deposit. 
Negotiability.     Missouri  statute,  &c. 
Instrument  drawn  on  bank  in  another  State  still  a  check. 
Instruments  in  form  of  checks,  but  not  so  really,  because  the  bank 
was  closed. 
Checks  as  Bills  of  Exchange.     Days  of  grace. 

United  States  Supreme  Court  summary  of  the  likeness  and  differ- 
ence between  checks  and  bills. 
C.  J.  Shaw's  opinion. 
Grant's  summary. 
Instruments  Payable  at  a  Dat  Certain. 

608 


§368. 

§309. 

§370. 

§  871. 

§372. 

§  373. 

§374. 

§  375. 

§  376. 

§377. 

§378. 

§  379. 

§  .380. 

§381. 

ANALYSIS.  §  362 

§382  a.       The  iK'St  view  pives  grace,  except  where  usage  is  to  the  contrary. 
§  383.  New  York,  Georgia,  Missouri,  Oregon. 

Ohio  and  Caht'ornia  liold  such  usage  bad;  probably  very  weak  usage 
was  in  evidence. 
§  381 1>.   §  384.   Story,  Sliarswood  in  Pennsylvania,  and  the  Rhode  Island  courts 
§  385.       hold  such  instrument  a  check,  and  payable  without  grace. 
§  386.   Discussion  of  the  question. 

§  387.   Evidence  of  usage  should  be  received  on  this  subject. 
§  388.   Memorandum  Checks. 

As  to  the  bank,  they  are  the  same  as  any  other  check. 

As  to  the  drawer,  they  are  like  promissory  notes,  and  suit  may  be 

brought  against  him  without  previous  presentment. 
Parol  not  admissible  to  show  that  an  ordinary  check  was  really  a 
"  mem." 
§  389.   Ante-dated  and  Post-dated  Checks. 
(a)  Bank  pays  before  date  at  its  own  risk. 

(c)  Post-dated  clieck  cannot  be  presented  for  acceptance  before  its  date. 

(d)  Authority  to  an  agent  to  draw  "checks  "  or  to  draw  "bills  "  does  not 

give  power  to  draw  post-dated  checks  in  his  principal's  name. 
§  390.  Issue. 

Checks  take  effect  from  their  issue,  or,  if  this  is  conditional,  then,  as 

to  those  with  notice,  from  the  fulfilment  of  the  condition. 
A  check  is  issued  when  it  is  in  the  hands  of  one  who  may  demand 

payment. 
So  far  as  concerns  the  bank,  it  is  issued  even  in  the  hands  of  a  thief, 

if  the  bank  pays  it  bonajide  without  notice. 
Conditional  delivery  may  be  shown  by  parol,  as  between  the  original 
parties  or  those  having  notice. 
Indorsement  of  Checks. 
§  391.  The  effect  of  indorsement  depends  on  the  actual  intent  as  to  those 

having  notice  of  such  intent,  and  on  the  presumptions  arising  from 
the  course  of  business  as  to  others  in  cases  where  the  actual  intent 
differs  from  that  presumed,  as  where  A.  indorses  in  blank  for  col- 
lection purposes.  As  to  the  bank  knowing  the  purpose,  A.  is  not 
bound  as  an  indorser,  but  as  to  a  subsequent  holder  for  value  with- 
out notice  A.  is  bound. 
An  indorsement  is  often  a  mere  receipt. 

A  check  payable  to  A.  or  bearer  may  be  indorsed,  and  if  it  is  done 
animo  indorsandi,  A.  will  be  bound. 
§  392.  Indorsement  by  a  lunatic  not  under  guardianship  held  to  pass  no 

rights  to  a  bona  fide  holder  without  notice.     Qua;re  as  to  the  jus- 
tice of  this. 
§  393.   Checks  payable  to  Bearer. 
Pass  by  delivery. 

Prima  far.'ie  the  holder  is  the  owner. 

May  be  indorsed,  but  the  intent  to  become  liable  must  appear  or  be 
shown  ;  usually  such  indorsement  is  only  a  receipt. 
§  304.   Money  given  to  the  Drawer  of  a  Worthless  Check. 
§  395.   Transfer  of  Check  by  Mail. 

VOL.  I.  39  609 


§  363  CHECKS   IN    GENERAL. 

§395  A.   Lost  Checks.     §633,0.6. 

True  owner  may  recover  from  drawer,  unless  the  check  has  como 
to  a  bona  fide  holder,  and  equity  will  compel  the  drawer  to  give 
a  new  check  on  proper  indeiiinily  being  given  him. 

If  a  lost  clieck  is  i)aid  on  a  forged  indorsement,  tlie  true  owner  may 
sue  the  bank,  but  not  tiie  drawer? 

§  363.  Description  and  Elements  of  a  Check.  —  A  check  is 
the  instruiucnt  by  which,  custonuirily,  a  depositor  seeks  to 
withdraw  his  funds,  or  any  part  thereof,  from  the  bank.  It 
is  a  draft  or  order  on  the  bank  requiring  it  to  pay  a  sum 
named.  It  may  be  made  payable  "  to  bearer,"  or  "  to  A.  or 
bearer,"  or  "  to  A.  or  order,"  or  "  to  the  order  of  A."  In  the 
two  latter  forms  it  must  be  paid  to  A.  in  person,  or  to  one 
deriving  title  from  him  through  his  indorsement.  It  is  cus- 
tomary to  indorse  even  when  the  payee  makes  the  present- 
ment and  demand,  the  indorsement  then  having  the  effect  of 
a  receipt. 

(a)  The  rules  governing  indorsement  in  cases  of  bills  of  ex- 
change, promissory  notes,  and  other  business  paper  made  pay- 
Indorse-  aWe  to  order,  govern  checks  also.  Thus  a  check 
ment.  ^c^y  ^q  indorsed  generally,  or  in  blank,  or  to  the 

order  of  B.,  who  again  may  indorse  generally,  or  in  blank,  or 
to  the  order  of  C.  Any  bona  fide  holder  of  the  check  indorsed 
in  blank  may  fill  in  a  special  direction  above  the  indorsement, 
making  it  payable  to  himself  or  order;  and  in  suing  thereon, 
though  he  has  not  written  in  such  direction,  he  may  declare 
upon  it  as  indorsed  to  himself,  and  will  sufficiently  support 
his  declaration  by  showing  that  it  was  indorsed  in  blank, 
and  that  he  is  the  holder  for  value,  and  in  due  course  of 
business. 

§  363.  Note.  —  In  using  this  chapter  it  should  be  borne  in  mind  that 
it  does  not  profess  to  treat  exhaustively  the  entire  subject  of  checks  con- 
sidered as  a  species  of  commercial  paper.  To  do  .so  would  be  to  trespass 
more  largely  upon  the  domain  of  works  on  Promissory  Notes,  Bills,  &c., 
than  our  space  permits.  It  is  of  the  law  of  checks  so  far  as  banks  are 
parties  to  them,  and  owe  duties,  assume  obligations,  or  enjoy  rights  in 
respect  to  them  and  to  transactions  into  which  they  enter,  that  we  design 
to  treat.  Beyond  these  limits  this  chapter  does  no^t  pretend  to  state  the 
law  or  cite  authorities. —  Author. 

610 


ORDERS  UNUSUAL  IN  FORM.  §  363 

If  a  bank  refuses,  without  sufficient  excuse,  to  paj-  a  check 
of  its  depositor,  it  is  liable  to  him  (as  will  be  seen  hereafter) 
in  substantial  damages.  It  is  therefore  of  the  first  „ 
importance  that  it  should  be  clearly  understood  and  mere 
by  the  paying  officers  of  banks  what  are  essential 
requisites  going  to  the  validity  of  a  check,  and  what  are 
merely  customary  formalities  which  may  yet  be  legally  dis- 
pensed with.  For  if  the  check  be  lacking  in  any  of  the  for- 
mer class  of  charactei'istics,  the  bank  is  not  only  justified  in 
refusing  to  pay  it,  but  if  it  does  pay  it  and  there  turns  out 
to  have  been  anything  wrong  about  it,  rendering  the  payment 
improper,  the  bank  must  bear  the  loss,  and  restore  to  the 
drawer's  credit  the  amount  paid.  But,  upon  the  other  hand, 
though  some  of  the  latter  class  of  characteristics  may  be  want- 
ing, yet  the  bank  is  not  thereby  excused  from  its  obligation  tf> 
pay ;  for  the  order  being  good  at  law,  though  in  an  unusual 
form,  is  competent  to  draw  the  money  of  the  depositor.  If 
the  bank  refuses  to  pay  upon  such  an  order,  it  must  still,  in 
strict  law,  be  held  to  answer  in  damages.  Clearly  this  is  the 
logical  sequence  of  the  reasoning,  and  yet,  though  there  is  now 
no  judicial  authority  for  saying  so,  it  seems  highly  probable 
that  in  cases  where  this  rule  would  operate  with  excessive 
and  unreasonable  severity  upon  the  bank  it  may  be  relaxed. 
There  is  no  question  but  that  a  bank  is  entitled  to  exercise 
great  care  and  caution  to  avoid  being  imposed  upon  and 
robbed  by  fraudulent  and  irregular  orders.  There  is  no  ques- 
tion that  it  ought  to  have  the  right  to  demand  of  its  deposi- 
tors reasonable  assistance,  and  a  conformity  to  some  moderate 
degree  of  consistency  of  conduct  in  drawing  their  orders,  in 
order  to  render  this  difficult  task  of  the  bank  at  least  a  prac- 
ticable possibility.  It  cannot  be  said,  that,  because  a  depositor 
ordinarily  uses  a  certain  form  of  blank  check,  therefore  the 
occasional  use  of  a  check  of  a  different  form  would  authorize 
the  bank  in  rejecting  it,  or  in  suspending  payment  till  it  could 
satisfy  itself  of  the  authenticity  of  the  instrument.  Such  de- 
viations from  routine  continually  occur,  and  are  to  be  ex- 
pected. But  if  the  order  be  couched  in  any  very  peculiar  and 
unwonted  shape,  and  bear  upon  its  face  such  marks  of  peculi- 

611 


R  304  CHECKS   IN   GENERAL. 


arity  as  naturally  to  cast  upon  it  a  higli  degree  of  suspicion 
in  tiie  minds  of  the  bank  officers,  it  seems  only  just  that  they 
should  have  time  to  assure  themselves  of  its"  regularity. 

{b}   The  depositor,  having  by  his  own  eccentricity  given 
sufficient  cause  for  the  suspicion,  should  not  be  suft'cred  to 
avail  himself  of  his  own  improper  act  to  recover 
linrshduw    damages  from  the  bank,  or  to  put  it  to  the  vexation 
inquire.         ^^^^  cxpcnsc  of  a  lawsuit    This  rule  certainly  seems 
perfectly  accordant  with  equity,  and  not  discordant  with  law. 
At  worst,  it  cannot  be  doubted  that  the  law  could  limit  the 
amount  recoverable  to  nominal  damages.     A  very  strong  case, 
however,  ought  to  be  made  out  by  the  bank  in  order  to  give 
it  the  privilege  of  availing  itself  of  such  a  rule  to  its  full  ex- 
tent.    For  a  bank  is  held  to  know  its  customer's  handwriting, 
and  any  order  in  his  handwriting,  having  the  legal  requisites, 
is  a  defence  to  the  bank  if  it  pays  thereon.     So  that  the  pecu- 
liarity in  an  instrument  of  this  description  ought  to  be  consid- 
erable in  order  to  make  out  a  satisfactory  case  for  temporary 
refusal.     But  any  noteworthy  peculiarity  might,  perhaps,  be 
properly  admitted  in  evidence  in  a  suit  at  law  by  way  only  of 
mitigation  of  damages,  if  the  bank  should  show,  as  a  fact,  that 
it  was  exclusively  by  reason  of  this  characteristic,  though  the 
same  did  not  constitute  a  legal  defence,  and  not  from  any 
other  default  on  its  own  part,  that  it  refused  to  make  the  pay- 
ment.    For  clearly  a  bank  has  a  right  to  demand  some  duties 
from  its  customer  in  such  an  important  matter  as  that  of  pro- 
tection from  fraud  in  a  business  where  frauds  of  a  peculiarly 
artful  and  ingenious  nature  are  continually  in  the  course  of 
perpetration. 

(c)  Further,  distinctions  may  properly  be  drawn  between  an 
absolute  refusal  to  pay,  and  a  demand  for  a  reasonable  delay. 
Distinction  Sufficient  only  to  enable  the  bank  to  satisfy  itself 
between         ^f  ^^^^^  corrcctncss  of  the  instrument  presented.    The 

refusal  and  ' 

delay-  latter  may  often  be  proper  when  the  former  could 

not  be  considered  so. 

§  364.    Essentials.  —  At  common  law  no  precise  form  is  in- 
dispensable to  the  validity  of  a  check,  though  there  are  some 
few  elements  which  are  essential,  and  which  must  be  present 
612 


ESSENTIALS.  §  365 

to  secure  its  legal  sufficiency.  In  England  the  statutes  define 
certain  requisites.  lu  this  country  no  such  enactments  have 
yet  been  passed.'  They  are,  however,  the  less  missed,  because 
adjudicated  cases  have  pretty  thoroughly  covered  the  ground. 

§  365.  Signature.  —  In  the  first  place,  the  signature  of  the 
drawer  is  necessary.^  But  it  is  not  indispensable  that  this  sig- 
nature should  appear  in  the  ordinary  form  at  the  foot  of  the 
check.  It  may  be  embodied  in  the  instrument,  as,  for  exam- 
ple, "  I,  A.  B.,  direct,"  or  •'  A.  B.  requests."  If  it  be  thus 
written  in  an  order,  otherwise  sufficient  and  in  the  handwrit- 
ing of  the  drawer,  it  is  enough.  But  the  handwriting  of  the 
drawer  is  the  safeguard  of  the  bank  in  making  its  payment ; 
so,  though  the  instrument  be  not  under  seal,  and  the  deposi- 
tor may  give  a  simple  parol  authority  to  another  to  sign  his 
name,  which  if  it  could  be  shown  by  the  bank  would  justify 
its  payment  on  the  order  so  signed,  yet  this  signature  does  not 
render  it  incumbent  on  the  bank  to  pay.  The  signature  in 
the  handwriting  of  the  drawer,  or  by  his  attorney,  whose 
power  has  been  duly  notified  to  the  bank,  is  an  element  which 
the  bank  may,  and  for  its  own  safety  ought  to,  insist  upon. 

(a)    Annexing  "  Agent,"  "  Trustee,"  "  Treasurer,"  &c.,  to  a 
signature,  does  not  of  itself  notify  parties  that  the  signer  acts 
only  as  a  representative,  when  he  does  not  disclose   Rgpresenta- 
his  principal.     It  is  mere  descriptio  personce.     But   j!"''^  ^^^' 
if  the  addition  expresses  the  fact,  and  he  has  been   whose 
in  the  habit  of  signing  in  that  way  in  dealing  with   ^^^^^' 
a  particular  party  who  recognizes  him  in  his  representative 
character,  "  it  would  be  contrary  to  justice  and  truth  to  con- 
strue the  document  thus  made  as  his  personal  obligation,  con- 
trary to  the  intent  of  the  parties."  ^ 

In  this  case  a  personal  recovery  was  sought  on  a  check 
signed  "  E.  P.  A.,  Secretary,"  and  "W.  S.  W.,  Vice  Prest."; 
and  Judge  Bradley  said  that  such  signatures  were  very  un- 
usual in  individual  transactions,  and  pointed  so  clearly  to  an 
official  origin  that  it  might  be  doubted  if  any  holder  could 

1  §365.  Taylor  v.  Dobbins,  1  Strange,  399;  Saunderson  v.  Jackson, 
2  B.  &  P.  238;  Grant  on  Bankers  and  Banking,  27. 

2  Metcalf  V.  Williams,  104  U.  S.  98. 

613 


§  366  CHECKS   IN    GENERAL. 

claim  ignorance  of  the  real  character  of  the  check  ;  but  in  this 
case  it  was  unnecessary  to  decide  that  point,  as  the  holder  act- 
ually knew  the  origin  of  the  check,  and  "  the  plea  that  the 
name  of  the  principal  was  not  disclosed  on  the  face  of  the 
paper  cannot  be  made  by  him,  for  he  knew  all  about  it."^ 

{b)  When  the  check  discloses  the  name  of  the  corporation 
principal,  and  is  signed  with  an  official  addition,  it  is  usually 
held  to  be  a  corporate  check,  as  where  "^tna  Mills"  was 
printed  in  the  margin  and  the  signing  was  "  J.  D.  F.,  Treas."  ^ 
So  where  "  Office  of  Portage  Lake  Manftg.  Co."  was  printed 
at  the  top  of  bills,  and  they  were  signed  "  I.  R.  J.,  Agent  "  ;* 
and  where  "  Pompton  Iron  Works"  was  in  the  margin,  and  the 
draft  was  signed  "  W.  B.,  Agt.  "  ;5  and  where  the  draft  said, 
"  Charge  the  same  to  Swanzey  Paper  Co.,  J.  H.,  Agt."^ 

Wliere  a  check  was  signed  by  three  directors  individually, 
their  official  character  nowhere  appearing,  and  also  by  the 
secretary  with  his  addition  "  Secretary,"  and  the  name  of  the 
principal  Avas  not  disclosed,  it  was  held  not  to  be  a  corporate 
check.'^ 

(c)  Where  it  is  doubtful  on  the  face  of  a  check  whether  it 
is  intended  as  an  individual  obligation  or  not,  parol  evidence  is 
admissible  to  show  who  was  intended  to  be  bound ;  as  where 
the  signature  was  "  J.  K.,  Prest.  Eliztn.  &  S.  R.  R.  Co."  » 

§  366.  For  a  Sum  certain. — The  sum  to  be  paid  must  be 
set  forth  with  that  degree  of  precision  which  will  enable  the 
bank  to  know  with  certainty  what  it  is.  It  must  be  in  terms 
of  the  national  money  of  account,  and  not  of  foreign  money. 
A  check  drawn  on  one  of  our  banks  by  a  depositor  living  here, 
and  expressed  in  sovereigns  or  in  francs,  would  properly  be 
refused  payment.^     But  familiar  and  unmistakable  abbrevia- 

8  Carpenter  v.  Farnsworth,  IOC  Mass.  561. 

*  Slawson  v.  Loring,  5  Allen,  343. 

^  Fuller  V.  Hooper,  3  Gray,  334. 

•>  Tripp  V.  Swanzey  Paper  Co.,  13  Pick.  291.  See  also  Bank  of  British 
North  America  v.  Hooper,  5  Pick.  5G7. 

7  Serrell  u.  Dt-rby-shire  11.  R.  Co.,  19  L.  J.  C.  P.  377.  * 

»  Lazarus  v.  Shearer,  2  Ala.  718;  Keen  v.  Davis,  21  N.  J.  Law,  683. 

1  §  306.  Kastell  v.  Draper,  Yelv.  80;  Moore,  775;  Cro.  Jac.  88;  Grant 
on  Bankers  and  Banking,  10,  and  note. 

614 


ESSENTIALS.  §  367 

tions  may  be  used.  Thus  in  England  the  marks  "X.  s.  d.,"" 
without  more,  have  been  held  sufficiently  to  signify  pounds, 
shillings,  and  pence.^  In  our  own  country,  it  has  been  sub- 
stantially held  that  the  sign  "  $  "  intends  "  dollars,"  although 
the  word  itself  nowhere  appears  in  any  other  form  throughout 
the  instrument.'"^  One  case  has  gone  much  farther  even  than 
this,  —  it  may  in  fact  prove  rather  dangerously  far,  when  it  is 
considered  how  easily  a  dot  may  slip  in  where  it  is  not  in- 
tended, or  where  a  comma,  which  signifies  a  very  different 
matter,  may  have  been  meant  to  be  placed.  An  order  was 
drawn  simply  for  "  37.80,"  in  figures,  without  even  the  mark  $, 
and  the  court  said  that  it  would  intend  therefrom  that  these 
numbers  were  used  as  whole  numbers  and  as  decimals,  to  ex- 
press United  States  currency.*  But  though  a  court  may  have 
been  willing,  in  a  certain  case,  to  prefer  this  interpretation  to 
the  necessity  of  otherwise  holding  an  instrument  void  for  un- 
intelligibility,  it  hardly  follows  that  a  bank  might  not  be  held 
fully  justified  in  declining  to  pay  a  draft  so  indistinctly  ex- 
pressed on  the  ground  of  an  uncertainty  so  great  that  it  could 
not  surely  know  what  its  customer's  order  really  was.  This 
might  well  be  adduced  as  an  example  of  one  of  those  cases, 
where,  even  if  the  court  should  still  hold  the  instrument  suf- 
ficient to  have  drawn  payment  from  the  bank,  yet  the  cus- 
tomer's carelessness  must  preclude  him  from  recovering 
damages  from  the  bank  for  refusing  to  pay. 

The  written  sum  controls  that  in  figures.^  On  the  margin 
of  a  check  was  "  2136.00  "  while  in  the  body  were  the  words, 
"  Twenty-one  and  thirty-six  in  exchange  dollars  "  ;  held  that 
the  words  contradicted  and  controlled  the  figures.^ 

§  367.  Address.  —  It  has  been  held  in  England,  and  it  is 
undoubtedly  law  also  in  the  United  States,  that  a  check  must 
be  addressed.     Ordinarily  our  bank  checks,  in  the  common 

2  Kearney  r.  King,  2  Barn.  &  Aid.  301. 
8  Corgan  v.  Frew,  39  111.  31. 
*  Northrop  v.  Sanborn,  22  Vt.  433. 
6  Smith  V.  Smith,  1  R.  I.  398. 

8  National  Bank  v.  Second  National  Bank  of  Lafayette,  69  Ind.  479 
(1880). 

615 


§  368  CHECKS   IN   GENERAL. 

forms,  bear  at  the  top  in  large  type  the  name  of  the  bank  on 
which  they  are  drawn,  and  usually,  either  before  this  name  or 
in  the  lower  left-hand  corner,  also  the  words,  "  To  the  cashier 
of,"  or  "  To  the  cashier."  Whether  or  not  these  words,  "  To 
the  cashier,"  are  indispensable  to  a  perfect  check,  has  never 
been  decided ;  it  may  be  supposed  that  they  are  not.  No  per- 
son or  institution  not  addressed  in  a  check  or  order  is  called 
upon  to  cash  it,  or  could  be  protected  in  erroneously  doing  so. 
A  payment  so  made  is  simply  a  gratuitous  payment,  which  the 
payer  can  recover  from  no  person.^ 

(d)  A  check  must  be  drawn  upon  a  banker,^  and  on  a  bank 
that  is  not  closed.^ 

(i)  Where  a  printed  form  upon  the  "  First  National  Bank 
of  Milwaukee  "  was  used  by  crossing  the  words  "  First  Na- 
tional "  and  writing  "  0.  M.  Tyler"  over  them  in  pencil,  it  was 
held  that  the  maxim  Falsa  demonstratio  non  nocet  applied, 
and  the  drawee's  name  was  sufficiently  certain,  although  the 
words  "  Bank  of  Milwaukee  "  remained  uncrossed.* 

That  the  instrument  is  drawn  upon  a  bank  or  banker  is  not 
of  itself  enough  to  distinguish  it,  since  a  bill  of  exchange  may 
be  addressed  to  a  banker.^  If  the  addressee  is  really  a  banker, 
this  is  sufficient  to  make  the  instrument  a  check,  though  his 
character  does  not  appear  in  the  paper,^  except  as  against  a 
holder  without  notice. 

(c-)  A  check  drawn  on  "A.  B.,  Bank  of  Milwaukee,"  there 

being  no  such  person  or  bank,  was  held  to  be  an  order  on  A.  B. 

and  that  parol  was  admissible  to  explain  the  matter 

Parol.  -,     ,  ,  ,  n  1  - 

and  show  who  was  the  addressee.' 
§  368.   Date.  —  A  check  must  be  dated.     It  may  be  dated 
either  on,  before,  or  after  the  day  it  is  issued.     But  it  would 

^  §  367.    Grant  on  Bankers  and  Banking,  p.  14,  and  authorities  cited. 

^  Roberts  v.  Austin,  20  Iowa,  315;  Planters'  Bank  v.  Kesee,  7  Heisk. 
200;  Espy  v.  Bank  of  Cincinnati,  18  Wall.  620. 

8  Harraanson  v.  Bain,  1  Hughes,  188.  A  draft  on  a  bank  in  liquida- 
tion is  merely  an  assignment  of  a  chose  in  action,  or  evidence  of  it. 

*  Cork  V.  Bacon,  45  Wis.  192. 

*  Georgia  National  Bank  i;.  Henderson,  46  Ga.  495. 
«  Planters'  Bank  v.  Kesee,  7  Heisk.  200. 

'  Cork  V.  Bacon,  45  Wis.  192. 
616 


ESSENTIALS.  §  370 

seem  that  if  a  check  is  not  dated  at  all,  and  contains  no  state- 
ment of  a  date  when  it  is  to  be  paid,  it  is  never  payable.  For 
a  check  is  payable  either  on  the  day  of  its  date,  or  else  on  some 
other  day  specifically  designated  in  it.  So,  if  it  is  not  dated  at 
all,  and  if  no  designation  occurs,  expressed  in  the  body,  which 
might  perhaps  operate  to  supply  the  deficiency  of  a  formal  dat- 
ing it  is  reasonable  to  say  that  it  can  never  become  due,  and 
payment  can  never  be  demanded.  If  this  rule,  which  is  not 
directly  asserted  in  any  adjudication,  goes  at  all  too  far,  it  is 
nevertheless  utterly  impossible  to  doubt  that  a  bank  would 
be  fully  justified  in  refusing  to  pay  a  check  showing  an  un- 
explained deficiency;^  of  so  important  a  character.  It  has  been 
said  that  a  check  may  be  dated  on  Sunday,  though  it  cannot  be 
payable  on  that  day.^ 

§  369.  On  Demand.  —  The  essential  characteristic  of  a 
check  is  that  it  shall  be  instantly  payable  on  demand.^ 

§370.  Payee  must  be  named.  —  Where  no  payee  is  indi- 
cated, the  instrument  is  not  a  check.^ 

(rt)  It  may  be  that  a  check  is  neither  made  payable  to 
bearer,  nor  to  the  order  of  any  person.  That  is,  it  may  be 
made  payable  to  the  order  of  A.  B.,  being,  or  in-  Fictitious 
tended  and  supposed  to  be,  a  fictitious  name.  In  i?'^y^^- 
such  case  no  indorsement  is  required,  for  the  check  is  re- 
garded as  equivalent  to  a  check  made  payable  to  bearer.^  In 
fact,  a  check  drawn  to  the  order  of  a  mere  name,  representing 
no  actual  individual,  is  not  drawn  to  the  order  of  any  person, 
but  to  the  order  of  mere  words.  It  is,  therefore,  incapable  of 
indorsement  by  a  payee,  and  is  of  like  character  with  the 
checks  forthwith  to  be  mentioned  in  this  connection. 

So  checks,  being  filled  in  on  printed  blanks  and  intended 
also  to  serve  as  memoranda  of  the  purpose  for  which  they 

1  §  368.   Begbie  v.  Levj\  1  C.  &  J.  180.     See  also  Grant  on  Bankers 
and  Banking,  p.  14.     See  below,  tit.  "  Post-dated  Checks." 
1  §  369.    :Merehants'  National  Bank  v.  Ritzinger,  118111.  486. 

1  §  370.    Mcintosh  v.  Lytle,  26  Minn.  336. 

2  Coggill  V.  American  Exchange  Bank,  1  N.  Y.  (Comst.)  113;  Plets  i>. 
Johnson,  3  Hill,  112;  Foster  v.  Shattuck,  2  N.  H.  446;  Vere  r.  Lewis, 
3  Term,  182;  Minet  i'.  Gibson,  id.  481,  and  s.  c.  1  H.  Bl.  569;  Collins  v. 
Emett,  1  H.  Bl.  313. 

017 


§  3(2  CHECKS  IN   GENERAL. 

are  drawn,  arc  often  made  payable  to  words  in  themselves 
meaningless  in  the  connection  in  which  they  arc  used  ;  e.  g. 
"  to  the  order  of  bills  payable,"  or  of  "  rent,"  or  "  of  1658," 
or  any  other  words  not  signifying  either  existing  persons  or 
a  corporation.  In  all  such  cases  the  checks  are  regarded  at 
law  as  if  they  had  been  made  payable  simply  to  bearer,  and 
they  have  all  the  legal  characteristics  of  checks  actually  so 
made.^ 

§  371.  "Words  of  Ordering.  — Finally,  it  sccnis  almost  super- 
fluous to  remark,  in  closing  the  list  of  indispensable  requisites, 
that  there  must,  of  course,  be  sufficient  words  of  ordering  or 
requesting  to  signify  the  intent  of  the  drawer  that  the  bank 
should  pay  the  sum  named  in  the  manner  named.  This  is 
elementary,  and  has  never  required  the  support  of  a  judicial 
decision. 

§  372.  Surplusage .  —  Provided  the  check  combines  all  these 
characteristics,  it  is  not  the  less  a  check,  nor  is  it  invalidated 
as  an  order  on  the  bank,  because  it  contains  other  immaterial 
matter ;  such,  for  example,  as  the  statement  that  it  is  given 
for  value  received,  or  a  mention  of  the  consideration.^ 

Where  a  check  contained  the  words  "  original  "  and  "  sec- 
ond unpaid,"  it  was  urged  that  these  expressions  made  its 
payment  conditional,  and  that  it  was  not  a  check.  But  the 
court  said  ^ :  "  The  practice  of  making  more  than  one  copy  of 
an  instrument  ordering  or  requesting  the  payment  of  money, 
we  concede,  is  generally  confined  to  foreign  bills  of  exchange  ; 
but  there  is  nothing,  in  our  opinion,  in  the  purpose  or  effect 
of  that  practice,  which  should  render  it  inapplicable,  under  all 
circumstances,  to  checks.  The  purpose  is  to  guard  against 
loss  or  question  in  case  of  miscarriage,  the  chances  of  the  bill 
reaching,  in  due  season,  the  party  to  whom  it  is  transmitted, 
being  increased  by  the  number  of  copies.  But  this  does  not 
render  the  instrument  a  conditional  one,  in  any  sense.     The 

8  Story  on  Promissory  Notes,  §  488;  Willets  r.  Phoenix  Bank,  2  Duer, 
121;  Mechanics'  Bank  v.  Straiton,  3  Keyes,  3G5;  Vere  v.  Lewis,  3  Term, 
182;  Minet  v.  Gibson,  id.  481;  1  H.  Bl.  569. 

1  §  372.    Wells  V.  Brigham,  6  Cash.  6. 

2  kercliants'  National  Bank  v.  Ritzinger,  118  111.  487. 

618 


SURPLUSAGE.  §  376 

whole  of  the  set  constitutes,  in  law,  but  one  bill,  and  therefore 
payment  or  cancelling  of  cither  of  the  set  is  a  discharge." 

An  instrument  is  not  less  a  check  because  it  orders  pay- 
ment "  on  account  of  A."  ^ 

§  373.  Presumptively  drawn  against  a  Deposit.  —  A  check 
purports  to  be  drawn  against  a  deposit.  It  may  not  really  be 
drawn  against  funds,  but  if  it  purports  to  be  it  is  a  check.^ 

A  check  is  presumptively  drawn  on  a  previous  deposit, 
and  is  an  absolute  appropriation  of  it  to  the  amount  of  the 
chcck.2 

§  374.  Negotiability.  —  In  Missouri  by  statute  the  words 
"  for  value  received  "  are  essential  to  negotiability.^ 

An  instrument  payable  "  in  bank  bills,"  or  "  in  currency," 
has  been  held  not  to  be  negotiable.^  But  the  better  opinion  is 
that  the  words  "  payable  in  currency,"  or  "  in  current  funds," 
do  not  impair  the  negotiability  of  a  bank  check;  such  terms 
mean  money .^ 

§  375.  Payable  in  another  State.  —  The  fact  that  the  instru- 
ment is  payable  in  another  State  than  the  one  in  which  it  is 
drawn,  does  not  change  its  character  as  a  check.^ 

§  376.  Instruments  having  the  Form  of  Checks.  —  An  instru- 
ment may  have  in  every  respect  the  form  of  a  check,  and  may 
yet  not  have  this  character  as  matter  of  law.  An  instance 
of  this,  and  perhaps  the  only  description  of  such  instances 
likely  to  occur,  is  furnished  by  the  following  case.  A  bank, 
after  having  ceased  to  do  business  for  ten  years,  resumed, 
but  only  for  the  purpose  of  liquidation.     In  this  process  seven 

3  109  111.  479. 

1  §373.  Champion  v.  Gordon,  70  Pa.  St.  476;  White  v.  Ambler,  8 
N.  Y.  170. 

2  Stevens  v.  Park,  73  111.  387;  Lester  v.  Given,  8  Bush,  103  (Ky.). 
^  §  374.    International  Bank  v.  German  Bank,  3  Mo.  App.  362. 

2  Little  V.  Phoenix  Bank,  2  Hill,  (N.  Y.)  425;  Bank  of  Mobile  v. 
Brunn,  42  Ala.  108. 

8  Bull  V.  First  National  Bank,  123  U.  S.  105. 

^  §  375.  Merchants'  National  Bank  v.  Ritzinger,  118  111.  486;  National 
Bank  of  America  v.  Indiana  Banking  Co.,  114  111.  483;  Union  National 
Bank  t'.  Oceana  County  Bank,  80  111.  212;  Planter.s'  Bank  v.  Kesee,  7 
Heisk.  200;  2  Parsons,  B.  &  N.  58,59;  Roberts  v.  Austin,  2G  Iowa,  315. 

619 


§  377  CHECKS    IN    GENEHAL. 

years  more  were  consumed,  durinj^  which  time  deposits  due 
from  tlie  bank  were  treated,  practically,  as  commodities, 
were  bought  and  sold  in  the  market  like  bonds  or  stocks, 
were  never  redeemed  in  money  by  the  bank,  but  were  only 
sought  by  parties  indebted  to  the  bank  in  order  that  they 
might  be  availed  of  in  set-off.  It  was  held  that  a  draft  drawn 
against  these  deposits,  though  in  form  a  check,  yet  was  not  so 
in  law,  inasmuch  as  it  was  not  in  fact  payable  in  money,  nor 
was  it  drawn  on  a  bank  properly  so  described  ;  also  because  it 
was  of  limited  negotiability.  It  was  said  to  be  simply  evi- 
dence of  an  assignment  of  a  chose  in  action.^ 

§  377.  Checks  as  Bills  of  Exchange  :  Days  of  Grace.  — 
Checks  are  constantly  stated  to  be  like  bills  of  exchange,  and 
to  be  governed  by  the  same  rules ;  sometimes  they  have  even 
been  said  actually  to  be  bills  of  exchange.  Other  authorities 
content  themselves  with  stating  that  the  analogy  between  these 
two  instruments  is  very  close.  Much  laxity  and  diversity  of 
language  will  be  found  in  the  opinions  of  the  courts  in  this 
respect.  The  judges  will  be  found  to  say  that  a  check  is  like 
a  bill  of  exchange,  except  in  certain  characteristics,  and  then 
each  judge  will  mention  the  characteristic  which  happens  at 
the  moment  to  occur  to  his  mind  as  presenting  a  point  of 
distinction.  But  the  controversy  seems  to  be  little  more  than 
one  of  language.  It  makes  very  little  difference  whether  it  be 
stated  that  a  bill  of  exchange  and  a  check  are  substantially 
one  and  the  same  instrument,  but  that  they  differ,  by  reason 
of  the  usages  of  business  and  the  manner  of  drawing  them,  in 
some  very  material  points ;  or  whether,  on  the  other  hand,  it  be 
stated  that  they  are  distinct  instruments,  but  that  they  have 
very  many  and  very  strong  points  of  resemblance  and  even  of 
identity.  The  one  statement  is  simply  based  on  a  recognition 
of  the  points  of  resemblance  as  forming  a  bond  of  union  strong 
enough  to  overcome  the  repulsion  of  the  points  of  difference. 
The  other  grows  out  of  the  view  that  the  substantial  differences 
are  more  powerful  to  sunder  the  two  classes  of  instruments 
than  the  points  of  similarity  are  to  unite  them.  It  follows 
that  so  long  as  all  arc  agreed  on  what  are  in  fact  the  points  of 

»  §  376.    Harmauson  v.  Bain,  15  Nat.  Bankr.  Reg  (E.  Dist.  Va.)  17o. 
620 


CONTRAST    WTTII    BILLS.  §  379 

resemblance,  and  what  are  in  fact  the  points  of  difference, 
this  is  all  that  is  really  essential  in  the  matter. 

§  378.  United  States  Summary  of  Likeness  and  Difference.  — 
The  Supreme  Court  of  the  United  States,  in  a  leading  case, 
says  :  "  Bank  checks  are  not  inland  bills  of  exchange,  but  have 
many  of  the  properties  of  such  commercial  paper ;  and  many 
of  the  rules  of  the  law  merchant  are  alike  applicable  to  both. 
Each  is  for  a  specific  sura  payable  in  money.  In  both  cases 
there  is  a  drawer,  a  drawee,  and  a  payee.  Without  acceptance 
no  action  can  be  maintained  by  the  holder  upon  either  against 
the  drawee.  The  chief  points  of  difference  are  that  a  check 
is  always  drawn  on  a  bank  or  banker  ;  no  days  of  grace  are 
allowed.  The  drawer  is  not  discharged  by  the  laches  of  the 
holder  in  presentment  for  payment,  unless  he  can  show  that 
he  has  sustained  some  injury  by  the  default.^  It  is  not  due 
until  payment  is  demanded,  and  the  Statute  of  Limitations 
runs  only  from  that  time.  It  is  by  its  face  the  appropriation 
of  so  much  money  of  the  drawer  in  the  hands  of  the  drawee 
to  the  payment  of  an  admitted  liability  of  the  drawer.  It  is 
not  necessary  that  the  drawer  of  a  bill  should  have  funds  in 
the  hands  of  the  drawee.  A  check  in  such  a  case  would  be 
a  fraud."  ^  Further,  it  is  admitted  without  dispute  that  a 
check  is  '"  never  presentable  for  acceptance,  but  only  for  pay- 
ment" ;2  that  is  to  say,  the  holder  has  no  right  to  demand 
anything  save  a  cash  payment ;  he  has  no  claim  upon  the  bank 
to  accept. 

§  379.  Opinion  of  c.  J.  Shaw.  —  "A  check  is  an  order  to 
pay  the  holder  a  sum  of  money  at  the  bank  on  presentment  of 
the  check  and  demand  of  the  money ;  no  previous  notice  is 
necessary ;  no  acceptance  is  required  or  expected  ;  it  has  no 
days  of  grace.  It  is  payable  on  presentment,  and  not  before. 
Mere  notice  to  the  bank  that  a  party  holds  a  check  without 
presentment  and  demand  will  not  bind  the  bank,  and  if  there 

1  §  378.  See  also  Keene  v.  Beard,  8  C.  B.  N.  s.  372;  Laws  v.  Rand,  3  id. 
442;  Robinson  v.  Hawksford,  9  Q.  B.52. 

^  Merchants'  Bank  v.  State  Bank,  10  Wall.  604,  at  p.  647.  See  Espy 
V.  Bank  of  Cincinnati.  18  Wall.  604,  at  p.  620. 

8  Morse  v.  Massachusetts  National  Bank,  1  Holmes,  C.  C.  209. 

621 


§  380  CHECKS   IN   GENERAL. 

be  funds,  when  notice  is  thus  given,  without  presentment  for 
payment  by  the  holder,  and  in  the  mean  time  other  checks 
of  the  same  drawer  are  presented  and  the  fund  paid  out  upon 
them,  the  bank  is  not  liable.  Checks  are  not  payable  in  the 
order  of  the  priority  in  which  they  are  given,  but  in  that  in 
which  they  are  presented."  ^ 

Bank  checks  arc  in  form  and  effect  bills  of  exchange,  not 
direct  proiiiiscs  to  pay,  but  only  in  case  the  drawee  docs  not 
pay  .2 

§  380.  To  our  mind  the  differential  traits  decidedly  pre- 
ponderate ;  and  the  more  correct  method  is  to  treat  the  check 
as  an  altogether  independent  and  distinct  instrument  from 
the  bill  of  exchange,  admitting  at  the  same  time  that  in  some 
few  specific  matters  the  resemblance  between  the  two  instru- 
ments is  sufUciently  strong  to  cause  one  and  the  same  rule  to 
cover  and  include  them  both.  Mr.  Grant  would  appear,  how- 
ever, to  be  of  the  contrary  mind.  He  says,  "  Checks 
are,  by  recent  legislation  imposing  a  stamp  duty 
upon  them,  and  creating  a  class  payable  to  order,  nearly  on 
the  same  footing  as  bills  of  exchange ;  and  the  decisions  of 
the  courts  have  been  of  late  in  favor  of  putting  them  on  the 
same  footing  as  to  their  general  legal  incidents  and  char- 
acteristics." ^  Yet  he  follows  this  statement  with  such 
a  formidable  array  of  the  points  of  dissimilarity  as  would 
seem  to  show  that  it  is  impossible  thus  to  unite  the  two  in- 
struments into  a  single  legal  entity  without  creating  infinite 
confusion,  inconsistency,  and  doubt.  His  list  is,  briefly,  as 
follows :  — 

First.    No  days  of  grace  are  allowed  upon  checks. 

Second.  The  payee  of  a  check  does  not  obtain  any  more 
time  by  employing  a  banker  to  present  it ;  whereas  the  holder 
of  a  bill,  by  the  same  course,  would  obtain  an  extra  day.^ 

Third.  The  death  of  a  drawer  of  a  check  revokes  the 
drawee's  authority  to  pay ;  whereas  the  death  of  the  drawer 

1  §  379.    Shaw,  C.  J.,  in  Bullard  v.  Randall,  1  Gray,  606. 

2  Foster  v.  Paulk,  41  Me.  428. 

1  §  380.    Grant  on  Bankers  and  Banking,  3d  ed.,  p.  103  et  seq. 

2  Alexander  v.  Burchfield,  7  M.  &  G.  1060. 

622 


CONTRAST   WITH    BILLS.  §  380 

of  a  bill  has  no  effect  upon  the  duties  of  the  other  parties  to 
the  instrument.^ 

Fourth.  A  check  must  be  drawn  against  funds  of  tlie 
drawer  in  the  hands  of  the  drawee ;  whereas  there  need  be 
no  funds  of  the  drawer  in  the  hands  of  tlie  drawee  of  a  bill.* 

Fifth.  The  drawer  of  a  bill  is  discharged  by  want  of  due 
presentment  to  the  drawee ;  whereas  the  drawer  of  a  check 
is  not  discharged  by  any  length  of  delay  in  presentment,  at 
least  unless  he  can  show  actual  loss  or  injury  to  himself  by 
reason  of  such  delay ;  as,  for  example,  by  the  failure  of  the 
drawee  in  the  interval,^ 

Sixth.  Bills  of  exchange,  payable  on  a  fixed  day,  differ  in 
this  respect  from  a  check,  which  is  not  due  before  payment  is 
demanded.'' 

The  points  of  resemblance  between  checks  and  bills  of 
exchange,  noted  by  Mr.  Grant  in  the  same  connection,  are 
as  follows :  — 

First.  That  notice  of  nonpayment  of  the  check  and  non- 
acceptance  of  the  bill  may  be  dispensed  with,  if  the  drawer 
had  no  funds  or  no  sufficient  reason  to  expect  the  payment 
or  acceptance." 

Second.  That  checks  may  be  accepted  (though  infrequently), 
and  may  pass  by  delivery.^ 

Third.  That  the  holder  of  a  check  is  affected  by  equities 
and  infirmities,  in  like  manner  as  would  be  the  holder  of  a 
bill. 9 

The  main  point  of  difference,  upon  which  there  is  no  diver- 
sity of  authority,  is  that  a  check  has  no  days  of  grace.     It  is 

8  Billing  V.  Devaux.  3  M.  &  G.  571. 

*  Keene  v.  Beard,  8  C.  B.  n.  s.  372, 381. 

fi  Ibid.;  and  see  />o,s<,  title  "  Presentment,  the  Time  within  which  it 
should  be  made  and  the  Effect  of  Delay." 

«  Boehm  v.  Stirling,  7  T.  R.  430 ;  Alexander  i-.  Burchfield.  7  M.  &  G. 
at  p.  1067. 

T  Thomas  r.  Fenton,  5  D.  &  L.  28;  Kemble  v.  Mills,  1  M.  &  G.  757; 
9  Dowl.  440;  Carew  v.  Duckworth,  4  L.  R.  Exch.  313;  Robinson  v.  Hawks- 
ford,  9  Q.B.  52. 

8  Keene  r.  Beard,  8  C.  B.  n.  s.  372,  380. 

8  Whistler  v.  Foster,  14  C.  B.  n.  s.  248. 

623 


§  381  CHECKS   IN   GENERAL. 

])ayal)lc  immediately  upon  demand,  on,  or  at  any  day  after, 
the  day  of  its  date;  and  this  ecjually  though  the  words  "on 
demand  "  are  not  expressed.^"  There  can  be  no  question  of 
this  rule;  the  authorities  are  overwhelming.  But  it  often 
happens  that  instruments  otherwise  in  the  form  of  checks 
are  yet  in  some  way  made  payable  at  a  day  later  than  that 
of  their  issue,  and  sometimes  later  than  that  of  their  date. 
They  may  be  made  payable  at  a  day  later  than  that  of  their 
issue,  but  on  that  of  their  date,  by  being  dated  on  a  day  sub- 
sequent to  that  of  their  issue,  but  in  no  other  respect  what- 
Post-dated  socvcr  differing  from  a  check  payable  immediately, 
checks.  These  are  called  post-dated  checks ;  they  are  a  fa- 

miliar instrument,  and  will  be  fully  discussed  hereafter.  It 
suffices  for  our  present  purpose  to  say,  that  such  are  always 
payable  on,  or  at  any  time  after,  the  day  of  their  date. 

§  381.  Instruments  payable  at  a  Day  certain.  —  But  ofteu 
an  instrument,  in  its  form  substantially  like  a  check,  is  made 
payable  at  a  day  subsccjuent  to  that  both  of  its  date  and  of 
its  issue,  eitlier  by  naming  such  a  date  in  the  body  of  the 
instrument,  or  by  making  it  payable  so  many  days  after  date. 
In  such  cases  it  is  often  a  question  whether  or  not  grace  is 
to  be  allowed.     But  though  this  is  the  question,  it 

Instruments  iir  i>-ii-i  •     i. 

i)ayai)i(;  at  a  docs  uot  take  the  form  01  whether  or  not  grace  is  to 
a>  ceitain.  ^^  allowcd  on  such  a  check,  but  whether  or  not  such 
an  instrument  is  a  check  at  all.  For  if  it  is  a  check,  that 
simple  fact  is  conclusive  of  the  fact  that  it  is  payable  imme- 
diately on  demand  on  the  day  named,  without  grace.  A  check 
is  and  must  be  always  so  payable.  But  if  it  be  not  a  check, 
then  it  will  probably  have  the  customary  grace  of  the  place 
where  it  is  made  payable,  and  will  be  called  a  bill  of  exchange.^ 
The  various  cases  present  every  variety  of  instrument,  each 

10  Moyser  r.  Whitaker,  9  Barn.  &  Cr.  409;  Sutton  v.  Toomer,  7  id. 
416;  Down  v.  Hailing,  4  id.  3:30;  Dixon  «;.  Nuttall,  1  C.  M.  &  R.  307; 
Hare  v.  Copland,  13  Irish  C.  L.  426;  Grant  on  Bankers  and  Banking, 
p.  25;  Story  on  Promissory  Notes,  §  489;  Ex  parte  Brown,  2  Story,  503; 
Woodruff  V.  Merchants'  Bank  of  Albany,  25  Wend.  673;  Salter  v.  Burt, 
20  Wend.  205;  Morrison  v.  Bailey,  5  Ohio  St.  13;  Westminster  Bank  t'. 
Whoaton,  4  R.  I.  30;  Chapman  r.  White,  2  Seld.  412;  3  Kern.  290. 
»  §  381.  Barker  v.  Anderson,  21  Wend.  372. 
624 


GRACE.  §  381 

diverging  in  a  greater  or  less  degree,  and  in  its  own  peculiar 
manner,  from  the  ordinary  form  of  a  bank  check  dated  and 
payaljle  on  the  day  of  its  issue. 

(a)  Treating  generally  of  an  instrument  dated  on  a  certain 
day,  and  by  some  form  of  words  made  payable  at  a  day  certain 
thereafter,  it  is  probable  that  between  the  array  of  xhe  best 
opposing  authorities  the  preponderance  will  be  con-  '^■"■'''• 
sidercd  to  lie  in  favor  of  the  doctrine  that  such  paper  is  not 
to  be  considered  as  a  check,  but  as  an  inland  bill  of  exchange, 
and  therefore  entitled  to  grace.  We  cite  below  the  cases 
which  sustain  this  view,  and  it  will  be  seen  that  they  are  nu- 
merous, and  that  some  of  them  have  been  rendered  by  tribu- 
nals entitled  to  command  great  respect.^  Of  the  cases  cited 
the  one  carrying  the  most  weight  certainly  is  the  New  York 
case  of  Bowen  v.  Newell.  This  cause  was  litigated  by  the 
parties  with  great  pertinacity ;  it  is  in  the  Reports  four  dif- 
ferent times.  It  first  appears  in  5  Sandford,  326,  where  the 
court  held  that  the  instrument,  being  an  order  upon  a  bank 
to  pay  on  a  future  day  certain,  was  a  check,  and  not  entitled 
to  grace.  The  decision  in  5  Duer,  584,  was  to  the  same  effect. 
But  in  4  Seldcn,  190,  a  contrary  opinion  was  rendered.  The 
court  said  that  the  decision  of  Judge  Story  in  the  Matter  of 
Brown  (which  will  be  discussed  hereafter)  was  the  only  au- 
thority for  holding  such  a  document  to  be  a  check,  and  as 
such  not  entitled  to  grace ;  that  this  doctrine  was  untenable, 
and  that  the  contrary  must  be  pronounced.  The  case  came 
up  once  more  upon  a  side  issue,  reported  in  3  Kernan,  290 ; 
and  here  the  court  took  pains  to  say  that  their  decision  in 
4  Selden  was  to  the  effect  that  by  the  principles  of  the  law 
merchant  the  instrument  was  entitled  to  grace,  and  that  they 
were  still  of  the  same  mind,  though  now  they  allowed  local 
usage  to  control  the  law  merchant.     The  instrument  in  ques- 

2  Morrison  i'.  Bailey,  5  Ohio  St.  13;  Andrew  v.  Blackley,  11  id.  89; 
Bowen  v.  Newell,  4  Sold.  190,  overruling  the  same  case  in  5  Sandf.  326: 
again  affirmed  in  same  case  in  3  Kern.  290;  Brown  v.  Lusk,  4  Yerger, 
210;  Daniels  i'.  Kyle,  1  Kelley  (Ga.),  304;  Woodruff  v.  Merchants'  Bank, 
25  Wend.  673;  Miiiturn  r.  Fisher,  4  Cal.  35;  Bradley  v.  Delaplaine,  5 
Harr.  305;  Georgia  National  Bank  v.  Henderson,  40  Ga.  487. 

VOL.  I.  40  625 


§  381  CHECKS   IN   GENERAL. 

tion  was  drawn  in  New  York  upon  a  bank  in  Connecticut,  but 
this  fact  of  a  difference  of  States  was  not  availed  of  as  fur- 
nishing any  additional  reason  for  considering  it  a  bill  of  ex- 
change. The  decision  was  based  strictly  upon  the  wording 
of  the  document,  which  called  for  })aynicnt  on  a  day  certain 
after  the  date.  In  th(i  Pennsylvania  case,  Bradley  v.  Dela- 
plaine,  the  words  'Miinety  days  after  date  "  Avere  inserted  in 
an  ordinary  bank  check  before  the  words  directing  payment. 
The  court  said  it  was  a  bill  of  exchange. 

(6)  Upon  the  other  side  the  authorities  are  few,  and  derive 
their  weight  chiefly  from  the  influence  which  attaches  itself 
Contra,  to  the  opiuion  of  one  who  has  had  so  much  to  do 
Story.  ^^,j^jj  ^.|j(,  moulding  of  American  law  as  Mr.  Justice 

Story.  His  opinion,  delivered  in  the  Matter  of  Brown,^  is 
an  elaborate  disquisition,  in  wdiich  many  questions  concerning 
the  law  of  checks  are  treated  with  much  learning  and  clear- 
ness. He  lays  down  very  positively,  in  an  argument  of  con- 
siderable length,  that  an  instrument  having  the  general  form 
and  characteristics  of  a  check,  save  that,  being  drawn  and 
dated  on  a  certain  day,  it  is  made  payal)lc  on  a  future  day 
named,  is  payable  on  and  after  such  day,  immediately  up- 
on presentment,  without  grace.  He  well  remarks  that  the 
parties,  by  using  the  common  form  of  a  bank  check,  an  in- 
strument to  which  the  peculiarity  of  carrying  no  grace  is  well 
known  to  be  inseparably  attached,  signify  that  they  propose 
to  execute  and  issue  a  bank  check,  and  not  any  other  species 
of  business  paper  whatsoever ;  wherefore  they  impliedly  au- 
thorize and  direct  the  bank  to  treat  the  document  as  a  check ; 
that  is,  to  pay  it  immediately  upon  presentment  and  demand 
on  any  day  on  or  after  that  specially  named  for  payment.  At 
the  time  of  the  rendition  of  this  decision,  the  only  contrary 
authority  was  that  contained  in  the  decision  in  Brown  v.  Lusk, 
4  Yerger,  210,  which  Judge  Story  certainly  could  venture  to 
overrule,  and  which  he  did  not  hesitate  thus  to  dispose  of. 
In  Plarker  v.  Anderson  (supra),  Judge  Cowen  referred  to  this 
opinion  of  Judge  Story  with  respect,  and  evidently  inclined 
to  indorse  it  fully,  though  the  facts  immediately  before  him 

8  2  Stow,  502. 
626 


GRACE.  §  382 

did  not  render  it  wholly  necessary  for  him  to  do  so.  Speaking 
also  of  IJrown  v.  Lusk,  cited  above,  he  said  that  the  decision 
in  that  case  was  based  upon  a  citation  from  Chitty,  which 
upon  examination  proved  insufficient  to  sup))ort  the  doctrine 
so  built  upon  it.  But  the  judge's  general  line  of  argument 
was  chiefly  applicable  to  post-dated  checks,  about  which,  as 
before  stated,  the  law  is  well  settled. 

§  382.  New  York,  Ohio,  and  California.  —  It  will  bc  observed 
that  the  latest  decisions  tend  quite  uniformly  to  the  view  that 
all  such  hybrid  instruments,  which  are  ordinary  checks  in  all 
save  the  naming  of  a  future  day  for  payment,  but  in  that 
respect  are  bills  of  exchange,  take  their  legal  character  from 
this  last  important  feature,  and  bear  grace  accordingly.  The 
influence  of  New  York  decisions  upon  matters  of  financial  law 
is,  of  course,  of  immense  weight ;  and  these,  backed  by  the 
troop  of  lesser  authorities  which  have  already  adopted  the 
same  view,  will  doubtless  finally  suffice  to  settle  the  law  for 
the  country.  The  advantage  of  having  the  question  defini- 
tively settled  would  bc  so  great  that  the  community  will  prob- 
ably bc  well  satisfied  with  a  conclusion  in  either  direction. 
The  courts  in  New  York  arc  always  anxious  to  carry  out  and 
legalize  so  far  as  possible  what  is  known  to  be  the  common 
understanding  of  business  men.  Nowhere  else  is  evidence  of 
usage  and  custom,  in  business  causes,  so  readily  admitted  or 
so  much  deferred  to.  It  is  a  wise  and  wholesome  habit  of  the 
courts.  So  in  this  matter  of  checks  payable  at  a  future  day 
named,  when  the  courts  had  held  that  they  should  bear  grace, 
it  was  at  onee  proposed  to  offer  evidence  of  the  usage  and 
custom  among  business  men  not  to  regard  such  paper  as  en- 
titled to  any  such  privilege.  So  in  the  case,  above  discussed, 
of  Bowen  v.  Newell,^  evidence  of  the  custom  of  the  banks  of 
Connecticut  to  regard  such  orders  as  payable  instantly  was 
offered.  In  the  last  decision  which  was  rendered  in  the  case 
(3  Kernan,290)  it  was  said  that  it  appeared  from  the  findings 
of  the  lower  court  that  the  law  in  Connecticut  gave  no  grace 
on  paper  of  this  description,  that  therefore  of  course  there 
could  be  none ;  and  that  these  findings  of  the  lower  court 
»  §382.    ^n?e,p.  625. 

627 


^  384  CHECKS   IN   GENERAL. 

were  "upon  ovidence  derivcMl  from  the  best  sources,  and  of 
the  most  uiiqucstioiial)lc  character."  This  admirable  evidence 
was  simply  evidence  of  usage. 

The  o  Kcrnan  rule  is  both  the  best  in  sense  and  the  latest 
in  time,  and  may  be  regarded  as  conclusive  of  the  views  of 
the  New  York  judiciary.  But  in  Ohio  and  California  an  op- 
l)osite  rule  has  been  laid  down,  and  a  local  custom  to  regard 
such  orders  as  checks,  and  so  payable  at  once,  was  held  bad ; 
and  evidence  thereof  was  declared  inadmissible.^ 

§  383.  In  Pennsylvania  and  Rhode  Island,  a  draft  on  a 
banker  payable  so  many  days  after  date,^  or  after  sight,"'^  has 
been  held  a  check,  and  not  entitled  to  grace.  But  in  Ohio,^ 
Georgia,*  California,^  Missouri,^  and  Oregon,^  as  well  as  in 
New  York,  a  draft  on  a  bank  payable  at  a  day  certain  is 
held  entitled  to  grace,  at  all  events  unless  local  usage  varies 

the  rule. 

§  384.  Sharswood's  View.^  —  "  The  ordinary  commercial 
form  of  a  bill  of  exchange  payable  at  a  future  day  is  at  so 
many  days'  or  months'  notice  after  date  or  sight.  An  order 
so  drawn,  whether  upon  a  banker  or  any  other  person,  ought 
to  be  regarded  as  a  bill,  with  all  the  privileges  and  liabilities 
which  by  the  law  merchant  are  incident  to  a  bill.  The 
drawer,  by  adopting  this  usual  form,  must  be  held  so  to 
intend.  So  if  an  order  be  drawn  on  a  merchant  or  other 
person  not  a  banker,  with  whom  the  drawer  keeps  money 
on  deposit  subject  to  draft,  payable  at  a  future  day  named, 
there  exists  no  reason  why  the  same  rule  should  not  apply. 
But  there  is  a  good  reason  why  there  should  be  a  difference 
between  an  order  so  drawn  upon  a  banker,  which  certainly 

2  Morrison  v.  Bailey,  5  Ohio  St.  13;  Minturn  v.  Fisher,  4  Cal.  35. 
1  §  383.    Westminster  Bank,  4  R.  I.  30. 
'^  Herring  v.  Kesew,  South.  Law  Rev.,  Oct.,  1872. 
'  Morrison  r.  Bailey,  5  Ohio  St.  13. 
*  Georgia  National  Bank  v.  Henderson,  46  Ga.  496. 
6  Minturn  v.  Fisher,  4  Cal.  36. 

8  Ivory  V.  Bank  of  the  State,  36  Mo.  47.5.     See  Bradley  i'.  Delaplaine, 
5  Harr.  305;  Work  v.  Tatman,2  Houst.  304  (Del.). 
''  Hawley  v.  Jette,  10  Oregon,  31. 

1  §  384.    Sharswood,  iu  Champion  v.  Gordon,  70  Pa.  St.  474. 
628 


GRACE.  §  385 

must  be  presumed  to  be  by  a  person  who  keeps  money  on 
deposit  with  such  banker,  subject  to  draft,  and  an  order  on 
a  merchant  or  other  person. 

"If  such  an  order  draiim  upon  a  bank  payable  at  a  future 
day  named  hi  it  must  be  considered  as  an  inland  bill  of  ex- 
change, and  not  a  check,  then  the  payee  or  holder  has  a  right 
to  present  it  at  once  for  acceptance,  protest  it  at  once  for 
non-acceptance,  and  sue  the  drawer  immediately.  Should 
it  be  accepted,  however,  the  funds  of  the  drawer  in  the 
bank  would  necessarily  be  thereby  tied  up  until  the  day  of 
payment.  All  the  objects  of  directing  payment  at  a  future 
day  would  thus  be  frustrated.  What  the  drawer  undertakes 
is  that  on  a  day  named  he  will  have  the  amount  of  the  check 
to  his  credit  in  the  bank.  In  the  mean  time  he  wants  the 
full  and  free  use  of  his  entire  deposit.  It  is  not  denied  that 
a  post-dated  check  cannot  be  presented  for  acceptance.  That 
is  by  implication  payable  on  a  future  day.  Why  then  is  a 
check  expressly  so  made  payable  to  stand  on  different  ground? 
In  the  case  before  us,  an  ordinarily  printed  form  of  a  bank 
check  was  evidently  used,  and  the  day  of  presentment  written 
in  one  of  the  blanks.  This  is  the  most  convenient  form,  for 
it  calls  the  attention  of  the  cashier  or  paying  teller  to  the 
fact  which  he  would  be  likely  to  overlook  if  it  were  expressed 
only  by  the  date.  ...  If  we  determine  that  an  order  like 
that  before  us  is  not  presentable  for  acceptance  before  ma- 
turity, we  settle  the  question.  It  is  a  check,  and  not  a  bill 
of  exchange." 

§  385.  Rhode  Island.  — "  Ninety  days  after  date,  pay  to 
the  order  of  James  Wheaton,  four  hundred  and  fifty  dollars 

cents.    8450.    Sinope  Mills."    Indorsed  in  blank,"  James 

Wheaton,  per  B.  Cozzens,  Agent."  The  court  held  this  a 
check,  saying :  "  A  check  is  an  order  drawn  upon  a  banker, 
or  a  person  acting  as  a  banker  in  England,  or  in  this  country 
upon  such  a  person  or  upon  a  bank.  It  was  originally  part 
of  the  definition  of  a  check  that  it  was  payable  on  demand. 
It  was  afterwards  held  that  it  might  be  post-dated  and  still 
be  a  check.  In  such  case  it  was  payable  immediately  after 
date,  though  days  had  elapsed  since  it  came  to  the  payee's 

629 


§  386  CHECKS    IN    GENERAL. 

hands.  Slill  later,  it  was  held  to  be  a  check,  though  payable 
on  a  day  certahi  alter  date,  if  drawn  upon  a  bank  or  banker. 
The  instrument  in  suit  differs  from  the  last  in  this  only,  that 
the  day  when  it  is  ])ayable  is  not  named,  but  it  is  payable 
a  certain  number  of  days  after  date,  and  that  the  precise 
day  of  payment  is  to  be  ascertained  by  calculation ;  all  the 
elements  of  such  calculation  being  contained  in  the  paper 
itself.  Substantially  and  for  all  practical  purposes  it  is  the 
same,  since  the  day  may  be  made  certain  from  the  paper 
itself.  At  this  day  the  only  distinguishing  difference  be- 
tween a  general  hill  of  exchange  and  a  check  is  that  a  check 
must  he  draivn  upon  a  hank,  or  upon  a  hanker  or  one  acting 
as  a  hanker."  ^ 

§  386.  Discussion  of  the  Grace  Question.  —  Story's  argument 
seems  to  us  very  weak :  the  rule  that  a  check  has  no  grace  is 
a  result  of  the  fact  of  its  being  payable  on  demand.  It  is 
a  general  ])rinciple  of  commercial  law  that  demand  paper 
shall  not  have  grace,  and  it  is  not  a  peculiarity  of  a  check, 
but  belongs  to  all  paper  possessing  the  attribute  from  which 
this  sub-attribute  flows.  It  is  not  proper,  then,  to  argue  that 
a  merchant  drawing  an  instrument  payable  at  a  day  certain 
must  be  presumed  to  contemplate  that  it  will  have  no  grace 
because  it  is  on  check  paper.  That  is  to  argue  that  we  must 
decide  contrary  to  the  recognized  principles  of  law,  because 
it  is  likely  that  the  parties  misconceived  those  principles. 
Since  the  law  presumes  knowledge  of  itself,  it  would  seem 
more  proper  to  say,  that,  as  it  is  a  well  settled  principle  that 
all  paper  on  demand  has  no  grace,  and  that  all  paper  payable 
at  a  day  certain  has  grace,  the  parties  must  be  presumed  to 
have  contracted  in  reference  to  that  principle  and  have  in- 
tended the  instrument  to  have  grace.  Such  would  seem  to 
us  the  proper  reasoning  as  to  the  intent  of  the  parties,  looking 
at  the  question  as  though  it  had  arisen  for  the  first  time. 

When  we  turn  to  the  broader  aspect  of  the  question,  and 

ask  wdiat  rule  it  is  best  to  establish  to  secure  in  the  greatest 

degree   tlie   benefits  at  which  the  law  aims,  wo   note  that, 

other  things  equal,  simplicity  is  valuable  in  legislation,  as 

1  §  385.    Westminster  Bank,  4  R.  I.  30. 

630 


GRACE.  §  386 

rendering  conformity  to  law  easier,  favoring  prevision,  and 
lessening  litigation ;  without  some  good  reason,  then,  out- 
weighing this,  the  rule  of  the  law  merchant  previously  es- 
tablished should  be  applied,  and  an  instrument  payable  at  a 
day  certain  should  have  grace,  whatever  color  the  paper  may 
be  on  which  it  is  written. 

Notliing  can  be  gained  by  an  opposite  rule  but  a  senseless 
inconsistency  in  the  law.  If  the  drawer  wishes  the  instru- 
ment to  be  payable  without  grace,  he  can  accomplish  the 
object  by  post-dating  it.  It  is  perfectly  clear  that  every 
instrument  drawn  on  a  banker  is  not  a  check.  Authority  is 
clear  that  a  bill  may  be  drawn  on  a  banker,  and  the  char- 
acter of  the  paper  on  which  an  instrument  is  drawn  surely 
cannot  determine  its  character  in  opposition  to  its  words 
and  their  legal  effect,  and  it  is  perfectly  clear  that  if  the 
instruments  in  the  above  cases  had  been  drawn  on  ordinary 
white  paper  they  would  never  have  been  considered  checks. 

But,  on  the  other  hand,  because  such  drafts  are  clearly 
within  the  principle  allowing  grace,  and  are  not  checks  (if 
we  keep  that  word  to  designate  a  class  of  instruments  payable 
on  demand,  and  it  does  seem  a  pity  to  pour  confusion  into 
the  law  by  loosely  applying  terms  to  new  varieties,  and  then 
arguing  that  they  must  possess  all  the  attributes  connoted 
by  those  terms),  it  does  not  follow  that  they  must  neces- 
sarily possess  all  the  other  characteristics  of  ordinary  bills  of 
exchange.  There  is  nothing  to  prevent  the  discovery  of  new 
species  of  commercial  paper,  any  more  than  the  discovery 
of  new  forms  of  animal  life ;  and  it  would  be  just  as  rea- 
sonable for  naturalists  in  case  of  a  new  species,  B.,  interme- 
diate in  its  characteristics  between  A.  and  C,  to  say  that  it 
must  belong  to  A.  because  it  is  most  like  A.,  and  therefore  it 
must  be  deemed  to  have  all  the  attributes  of  the  members 
of  A.  already  known,  or  for  other  naturalists  to  class  it  in 
the  same  way  with  B.,  as  for  lawyers  and  judges  to  declare 
that  an  instrument  in  some  respects  like  an  ordinary  bill  of 
exchange  and  in  other  respects  like  a  check  is  to  be  consid- 
ered either  one  or  the  other. 

There  is  a  reason  for  each  attribute  that  has  been  adjudged 

631 


§  387  CHECKS    IN   GENERAL. 

to  belonfr  to  a  bill  or  a  check :  if  the  reason  exists  in  the 
new  instrument,  let  the  attribute  be  attached,  otherwise  not. 
So  while  the  paper  under  discussion  has  grace,  it  may  very 
properly  be  held  to  be  unlike  an  ordinary  bill  in  that  it  is 
not  ])resentable  until  the  day  named.  This  would  satisfy 
all  that  is  of  force  in  Sharswood's  opinion  above,  though 
whether  it  is  best  to  introduce  this  addition  to  the  law 
merchant  when  the  i)urpose  can  so  easily  and  clearly  be 
attained  by  the  words  "  without  acceptance,"  or  by  post- 
dating,   may    perhaps   be    open   to   argument. 

After  all,  the  really  important  matter  is  to  secure  a  uni- 
form, well  settled  rule,  and  this  seems  not  likely  soon  to  be 
obtained,  though  ultimately,  no  doubt,  usage  and  legislation 
will  bring  the  music  of  the  States  into  harmony. 

§  f387.  Evidence  of  Usage  as  to  the  question  of  grace  has 
been  offered  in  several  cases.  The  difficulty  in  admitting 
such  testimony  has  been  considered  to  lie  in  the  fact,  that  it 
is  the  proper  province  of  the  court  to  declare  what  is  the 
legal  character  of  such  documents,  whether  they  are  checks 
or  bills  of  exchange.  The  law,  it  is  considered,  must  make 
them  imperatively  cither  the  one  or  the  other,  and  according 
to  the  decision  must  be  the  equally  imperative  assertion  as  to 
whether  or  not  they  shall  bear  grace.  Usage  therefore  has 
been  deemed  inadmissible,  because  its  only  effect,  if  it  should 
have  any  at  all,  must  be  to  control  a  rule  of  law.  A  few 
authorities  sustain  this  view.i  It  was  certainly  the  view 
which  the  court  of  New  York  were  inclined  to  take  at  the 
time  of  the  earlier  decision  in  Bowen  v.  Newell.  No  one 
who  reads  that  opinion  can  fail  to  gather  this  conclusion 
from  it ;  and  it  was  upon  the  strength  of  this  that  the  Ohio 
case  was  decided.  But  the  latest  autliority  in  New  York  is 
the  decision  in  the  case  of  Bowen  v.  Newell  as  last  rendered 
and  revised,  published  in  3  Kernan,  290.  Here  the  court  say 
that  the  lower  court  have  found  that  the  law  in  Connecticut, 
where  the  pai)er  was  payable,  gives  no  days  of  grace  upon  it; 

2  §  387.    Morrison  v.  Bailey,  .5  Ohio  St.  13;  Minturn  v.  Fisher,  4  Cal. 
3.5.     See  also  Woodruff  v.  Merchants'  Bank,  25  Wend.  673;  Bowen  v. 
Newell,  4  Seld.  190;  3  Kern.  290. 
632 


GRACE.  §  387 

that  this  finding  of  the  law  was  "  upon  evidence  derived  from 
the  best  sources,  and  of  the  most  unquestionable  character." 
By  turning  to  the  report  of  the  cause  in  the  lower  court,^  we 
find  that  this  so  emphatically  excellent  evidence,  which  was 
allowed  so  thorougiily  to  settle  the  law,  was  simply  evidence 
of  the  usage  of  banks  and  (jf  persons  dealing  with  banks  in 
Connecticut.  The  court  escape  the  trouble  of  reconciling  this 
view  with  their  former  contrary  one  by  the  arbitrary  asser- 
tion that  in  4  Selden  they  only  held  that,  by  the  law  merchant, 
the  instrument  was  not  entitled  to  grace.  This  assertion  will 
satisfy  nobody ;  for  it  is  not  true.  But  its  degree  of  accu- 
racy is  a  matter  of  little  moment,  since  the  last  ruling,  in 
3  Kernan,  is  too  clear  and  positive  to  leave  any  doubt  as  to 
the  law  in  New  York. 

The  doubt  is,  simply,  whether  or  not  the  allowance  or  dis- 
allowance of  grace  upon  a  certain  anomalous  description  of 
paper  is  a  proper  subject  of  usage.  Why  it  should  not  be  so, 
it  is  difficult  to  say.  It  is  clear  that  such  paper,  whether  it  be 
called  a  check  or  a  bill  of  exchange,  is  a  materially  modified 
form  of  either.  It  is,  in  fact,  an  independent  and  anomalous 
species  of  paper.  When,  therefore,  it  is  considered  that  the 
entire  principal  which  gives  days  of  grace  upon  particular 
species  of  commercial  paper  was,  in  its  origin,  wholly  a  matter 
of  the  usage  of  bankers,  there  seems  no  reason  why  the  same 
usage,  if  actually  shown  to  exist,  should  not  be  properly  ex- 
tended to  still  another  species  of  paper,  of  comparatively 
modern  oi'igin.  Even  if  the  instrument  is  a  check,  it  is  a 
peculiar  alteration  of  the  common  form  of  checks.  It  is  clear 
that  the  allowance  of  grace  on  business  paper  is  a  proper  sub- 
ject of  usage,  since  it  owes  its  very  existence  to  usage.  Why, 
then,  are  not  checks  equally  a  proper  subject  for  usage,  and, 
if  so,  why  may  not  usage  draw  distinctions  in  this  respect  be- 
tween two  different  descriptions  or  classes  of  checks  which 
vary  from  each  other  in  so  important  a  trait  that  very  many 
courts  are  unwilling  to  apply  the  common  name  of  check  to 
each  of  them,  but  reserve  it  for  the  more  usual  kind,  and  pre- 
fer to  describe  the  others  as  bills  of  exchange  ? 

2  2  Duer,  58i. 

633 


§  388  CHECKS    IX    GENERAL. 

§  388.  Memorandum  Checks.  —  "Memorandum  cliecks,"  so 
called,  arc  inslrmiu'nt.s  of  (juite  common  use  in  business  cir- 
cles. Their  cluiracter  and  legal  effect  depend  somewhat 
upon  the  parties  between  whom  the  questions  concerning 
them  arise.  As  between  the  drawer  and  the  payee  they  are  a 
species  of  evidence  of  indebtedness.  They  arc  practically  in- 
tended as  such,  and  the  courts  recognize  them  as  such.  They 
are  usually  given  either  for  money  borrowed,  or  for  a  debt 
contracted  in  the  course  of  dealings.  They  are,  in  fact  and 
in  law,  equivalent  to  the  drawer's  promise  to  pay,  for  value 
received.  The  holder  may  sue  upon  them  as  upon  a  promis- 
sory note,  and  by  reason  of  their  peculiar  character  he  is  not 
held  to  present  them  at  the  bank  for  payment  prior  to  bring- 
ing his  suit  against  the  maker.^  Presentment  and  notice  are 
waived. 

(a)  But  as  between  the  drawer  and  a  person  other  than 
the  payee  receiving  the  check,  though  bona  fide  and  for  value, 
the  facts  that  the  abbreviation  "  mem."  is  written  on  its  face, 
and  that  it  is  two  and  one  half  years  old,  have  been  declared 
sufficient  to  put  such  taker  u])on  his  inquiry,  and  to  entitle  the 
drawer  to  set  up  as  against  such  taker  all  equities  and  defences 
which  he  could  have  set  up  as  against  the  original  payee.^ 

(J)  But  though  they  are  thus  a  complete  and  perfect  evi- 
dence of  indebtedness  as  between  these  parties,  as  between 
the  bank  and  the  payee  they  are  still  ordinary  checks,  noth- 
ing less  nor  more.  The  fact  that  the  word  "  memorandum  " 
or  the  abbreviation  "  mem."  is  written  on  a  check  is  sufficient 
in  law  to  render  it  a  memorandum  check.  But  the  bank  is 
not  bound  to  pay  any  attention  to  these  words,  or  to  recog- 
nize any  contract  as  implied  by  them  between  the  maker  and 
payee  which  gives  to  the  check  any  peculiar  character.  If 
such  a  check  is  presented  for  payment,  and  the  drawer  has  to 

1  §388.  Franklin  Bank  v.  Freeman,  16  Pick.  535;  Gushing  v.  Gore, 
15  Mass.  69.  In  Kelley  v.  Brown,  5  Gray,  108,  the  court  simply  say  that  the 
pleadings  are  so  imperfectly  drawn  that  the  questions  w^hich  the  plaintiff 
wished  to  have  decided  in  his  favor  could  not  arise  upon  them  at  all.  The 
decision  is  not  in  any  respect  at  variance  with  the  foregoing  authorities. 

2  Skilhnan  v.  Titus,  3  Vroom,  96. 

634 


"  MEM."    CHECKS.  §  389 

his  credit  funds  siiHiciciit  to  meet  it,  the  bank  must  honor  it 
precisely  like  any  ordinary  check.  If  the  agreement  or  under- 
standing between  the  drawer  and  the  payee  is  that  it  shall 
not  be  presented  for  payment,  any  remedy  of  the  drawer  for 
the  breach  is  solely  against  the  payee.  If  the  check  is  once 
drawn  and  delivered,  the  drawer's  reliance  that  it  will  not  be 
presented  at  the  bank  can  rest  only  upon  the  good  faith  of 
the  holder.  He  cannot  drag  in  the  bank  as  a  partner  in  the 
arrangement,  nor  alter  the  duty  of  the  bank  to  pay  his  drafts 
out  of  his  deposit.  This  is  a  rule  of  law.  Usage,  or  the  cus- 
tomary understanding  of  business  men  to  the  contrary,  cannot 
operate  to  change  it.^ 

(e)  An  ordinary  check  cannot  be  shown  by  parol  to  be  a 
"  mem."  *  The  practice  of  banlis  not  to  regard  the  word 
"  mem."  or  "  memorandum  "  on  checks  has  the  sanction  of 
law.^ 

§  389.  Ante-dated  and  Post-dated  Checks.  —  A  check  may 
be  either  ante-dated  or  post-dated.  An  ante-dated  check  is 
payable  immediately .^  A  post-dated  check  is  payable  on,  or 
at  any  time  after,  the  day  of  date.  There  is  no  question  but 
that  a  post-dated  check  is  in  the  United  States  a  perfectly 
legal  and  proper  instrument.^  In  England  a  statute  used  to 
require  that  a  post-dated  check  should  be  stamped  like  a  bill 
of  exchange,  and  otherwise  declared  it  invalid.^  But  no  such 
rule  has  ever  obtained  in  our  own  country.  A  post-dated 
check  on  its  date,  or  after  it,  is  payable  immediately,  just  like 
any  other  check.     We  are  now  speaking  of  post-dated  checks 

3  Dykers  v.  Leather  Manufacturing  Co.,  11  Paige,  612;  Stoi-y  on 
Promissory  Notes,  §  499;  Byles  on  Bills,  p.  *21,  Sharswood's  note. 

4  Kelly  V.  Brown,  4  Gray,  108. 

6  State  National  Bank  v.  Reilly,  3  111.  455;  11  West.  Rep.  733. 

1  §  389.    Story  on  Promissory  Notes,  §  490. 

2  Story  on  Promissory  Notes,  §  490;  Harker  v.  Anderson,  21  Wend. 
372;  Mohawk  Bank  v.  Broderick,  10  id.  304;  13  id.  133;  Salter  v.  Burt, 
20  id.  205;  In  the  Matter  of  Brown,  2  Story,  502. 

*  Grant  on  Bankers  and  Banking,  p.  22 ;  Watson  v.  Poulson,  7  Eng. 
L.  &  Eq.  585;  15  Jur.  1111;  Allen  v.  Keeves,  1  East,  435;  Martin  v.  Mor- 
gan, 3  Moore,  635;  1  B.  &  B.  289;  Byles  on  Bills,  p.  *17,  text  and  note 
(Sharswood's  ed.). 

635 


§  389  CHECKS   IN    GENERAL. 

strictly,  aiul  not  of  instruments  having  the  general  form  of 
checks  but  naming  a  day  certain,  or  a  certain  number  of  days 
after  date,  for  their  payment.  The  construction  and  legal 
qualities  of  these  instruments  have  been  already  discussed. 
Cut  the  simple  post-dated  check  proper  has  none  of  their 
traits;  neither  is  it  subject  to  any  of  the  questions  which 
have  been  mooted  concerning  such  other  nondescript  or  mon- 
grel documents.  There  is  no  possible  pretence  for  claiming 
days  of  grace  upon  it.  It  is  simply  and  unquestionably  paya- 
ble on  demand,  so  soon  as  the  day  of  the  date  comes  round.* 

(a)  But  it  is  the  bank's  own  risk  if  it  pay  before  that  day. 
Such  a  payment  is  irregular,  and  circumstances  may  easily 
Payment  be-  supervcnc  Under  which  the  bank  will  be  held  to  pay 
fore  date  is     ^|^g  amount  again,  or  to  restore  it  to  the  credit  of 

at  bank  9  n         7 

•■isk.  the  drawer,  if  it  has  debited  him  with  it ;  which, 

however,  it  has  no  right  to  do.  For  it  is  unquestionable  that 
in  the  interval  between  such  irregular  payment  and  the  day 
of  the  date  when  the  payment  could  be  properly  made,  the 
amount  ought  still  to  be  left  standing  to  the  credit  of  the 
drawer.  The  bank  has  no  right  to  charge  him  with  the  dis- 
bursement till  the  time  comes  when  the  disbursement  could 
be  properly  made  on  his  account.  His  check  is  no  order  till 
it  has  matured.  So  if  in  the  interval  he  continues  to  draw 
checks,  the  bank  must  continue  to  honor  them  upon  present- 
ment, so  long  as  his  account,  without  decrease  by  the  debit 
of  this  item,  is  sufhcient  to  meet  them,  until  the  day  of  the 
date  arrives.  When  that  day  docs  arrive,  the  bank  may  of 
course  appropriate  the  sum  it  has  paid  out.  But  if  then  the 
intervening  drafts  have  so  diminished  the  depositor's  balance 
that  the  remainder  is  not  enough  to  meet  the  amount  of  the 
post-dated  check,  the  deficiency  must  be  the  loss  of  the  bank.^ 

*  Mohawk  Bank  v.  Brodevick,  10  Wend.  304  ;  13  id.  133;  Harker  v. 
Anderson,  21  id.  372;  Story  on  Promissory  Notes,  §  490;  In  the  Matter 
of  Brown,  2  Story,  502. 

6  Grant  on  Bankers  and  Banking,  p.  64  ;  Da  Silva  v.  Fuller,  Chitty  on 
Bills,  180  (10th  Eng.  ed.),  cited  in  Morley  v.  Culverwell,  7  M.  &  W.  178; 
Gndin  v.  Bank  of  the  Commonwealth,  G  Duer,  7G  ;  Byles  on  Bills,  p.  *14 
(Sharswood's  ed.). 

636 


POST-DATED    CHECKS.  §  389 

Its  only  source  of  restitution  is  from  the  depositor.  Even  the 
right  to  demand  reimbursement  from  him  may  be  taken  away 
by  his  revocation  in  the  interval  before  the  maturity.  If  after 
the  bank  has  paid,  but  before  the  date  of  the  instrument  gave 
it  the  right  to  pay,  the  drawer  countermands  his  immature 
order  and  forbids  payment,  it  is  certain  that  the  anticipatory 
action  of  the  bank  cannot  operate  to  deprive  him  of  tliis  right. 

(i)  If  a  post-dated  check  falls  due  on  a  Sunday  or  on  a 
legal  holiday,  presentment  for  payment  cannot  be  made  until 
the  day  following.  Presentment  on  the  day  preceding  is 
irregular.  The  bank  is  not  bound  to  pay  on  that  day.  Ac- 
cordingly a  demand  then  made  is  so  far  erroneous  that  it  will 
operate  to  discharge  an  indorser,  unless  it  should  be  cured 
by  a  second  demand  properly  made  on  the  correct  day  sub- 
sequent.*^ 

((?)  A  bona  fide  transferee  of  a  post-dated  check  tak- 
ing before  date  for  an  existing  debt  takes  free  of  equities, 
and  can  recover  of  the  maker  though  the  check  was  without 
consideration.'' 

A  post-dated  check  cannot  be  presented  for  acceptance 
before  its  date.^  This  fact  that  the  payee  or  holder  cannot 
go  at  once  to  the  bank  and  have  the  check  certified,  illus- 
trates the  only  difference  between  ordinary  checks  and  those 
which  are  post-dated.  The  latter  are  not  different  in  any 
respect  after  the  day  of  their  date  arrives,  but  before  that 
the  depositor  has  a  right  to  draw  against  his  deposit  freely, 
without  regard  to  the  outstanding  check,  and  the  bank  cannot 
by  certification  before  date  withdraw  funds  from  his  control. 

(c?)    Authority  to  an  agent  to  draw  checks  does  not  confer 
power  to  draw  post-dated  checks.     Even  authority  to  make 
time  paper  will  not  cover  post-dated  paper.     When  Authority 
authority  to  make  one  kind  of  instruments  is  given,  ^wv*^post- 
in  order  that  another  shall  be  within  the  power  not  dated  checks. 
only  must  the  legal  effect  be  the  same,  but  all  their  incidents 

6  Salter  v.  Buvt,  20  Wend.  205. 

■^  Mayer  v.  Mode,  14  Hun,  155;  Schepp  v.  Carpenter,  51  N.  Y.  602. 
8  See  Sharswood's   opinion  in  Champion  v.  Gordon,  70  Pa.   St.  474, 
above  quoted,  §  384. 

637 


§  391  CHECKS   IN   GENERAL. 

SO  far  identical  that  both  may  fairly  be  supposed  to  have  been 
ill  the  uiind  when  the  authority  was  given.  The  faet  that  a 
post-dated  check  or  bill  would  not  be  forwarded  at  once  for 
acceptance,  like  an  ordinary  check  or  bill,  was  taken  advan- 
tage of  by  the  agent  to  hide  for  a  time  his  breach  of  trust  in 
drawing  a  check  for  his  own  benefit.^ 

Authority  to  draw  "  bills  "  docs  not  give  a  right  to  draw 
post-dated  checks ;  the  legal  effect  is  not  identical ;  bills  of 
exchange  have  grace,  post-dated  checks  no  grace.^^ 

§  39U.  Issuing.  —  As  i)roniissory  notes  and  deeds  require 
delivery  to  complete  their  validity  as  between  the  immediate 
parties  to  them,  so  also  does  a  check  require  delivery,  or,  as  it 
is  more  commonly  called,  "  issuing."  It  is  said  that  a  check 
is  "  issued  "  when  it  is  in  the  hands  of  any  person  entitled 
to  demand  cash  for  it.^  Thus,  if  it  be  stolen,  or  if  after  being 
lost  by  the  drawer  it  is  found  by  some  other  person,  it  is  not, 
in  the  hands  of  the  thief  or  of  the  finder,  "  issued  "  as  against 
the  drawer.  But  so  far  as  concerns  the  bank  it  would  be 
considered  as  issued,  and  the  bank  would  be  protected  in  pay- 
ing it,  provided  it  did  so  bona  fide,  and  with  no  knowledge  of 
the  precedent  circumstances.  The  law  presumes  that  a  check 
Delivery  on  operates  from  its  delivery,  but  it  may  be  shown  by 
Parol!'"""  parol  that  the  delivery  was  not  intended  to  put 
the  check  in  operation  until  a  certain  event  should  transpire. 
As  between  the  original  parties,  or  those  having  notice,  it  is 
competent  to  show  that  the  delivery  was  conditional.^ 

§  391.  Of  the  Indorsement  of  Checks.  —  A  clicck  may  be  in- 
Intent  rov-  dorscd  with  various  effects,  according  to  the  inten- 
on^havrng"^  tiou  of  the  iudorscr.  If  the  indorsement  be  made 
notice  of  it.     ammo  indorsandi,  with  the  intention  of  guarantee- 


»  New  York  Iron  I\Iine  v.  Citizens'  Bank,  44  Mich.  .344  (1880).  See 
Forster  r.  Mackreth,  L.  II.  2  Exch.  1G3. 

10  Salter  v.  Burt,  20  Wend.  20.5;  Taylor  v.  Sip.  30  X.  J.  284. 

1  §  300.  Grant  on  Bankers  and  Banking,  p.  14,  citing  Ex  parte  Big- 
nold,  1  Deac.  735;  2  Mont.  &  A.  633. 

2  Sweet  r.  Stevens,  7  R.  I.  375;  Wallis  v.  Littell,  5  Law  T.  Rep.  N.  s. 
489;  Murray  v.  Earl  of  Stair,  2  Barn.  &  Cr.  82;  Pyni  v.  Campbell,  25 
L.  J.  N.  s.  277. 

G38 


INDORSEMENT   OF   CHECKS.  §  391 

ing,  it  will  bind  the  indorser  as  a  guarantor  substantially 
in  like  manner  as  the  indorser  of  a  promissory  note  is 
bound.  The  case  has  arisen  where  a  check  payable  to  "A.  or 
bearer  "  was  by  A.  indorsed  and  delivered  to  B.,  and  by  B. 
transferred  to  the  plaintiff.  Upon  presentment  for  payment 
it  was  dishonored,  and  plaintiff  sued  A.  as  an  indorser.  An 
elaborate  argument  was  made  to  show  that  A.  could  not  be 
held  as  the  indorser  of  a  negotiable  instrument,  but  the  court 
held  the  contrary.  It  was  admitted  that  the  indorsement  had 
been  made  animo  indormndi.  The  case  was  decided  upon  the 
analogy  of  bills  of  exchange.^  It  is  probable  that  this  de- 
cision covers  not  only  the  indorsement  made  by  the  payee  of 
the  check,  but  by  another  person  who  should  indorse,  with 
the  intention  of  becoming  an  indorser ;  for  the  check,  in  this 
instance,  being  payable  to  A.  or  bearer^  did  not  require  the 
indorsement  of  A.  as  a  receipt  or  preliminary  to  payment, 
which  would  have  been  the  case,  at  least  by  custom,  had  it 
been  payable  to  A.  or  order. 

But  an  indorsement  not  made  animo  indorsandi,  but  for 
some  other  special  purpose,  will  not  bind  the  party  to  the 
liability  of  a  guaranteeing  indorser,  at  least  as  to-   y;vhen  in- 
wards any  person  chargeable  with  notice  of  such   ^orsement 

•'     i  o  js  a  mere 

special  intention.  Thus,  if  a  check  be  made  paya-  receipt. 
ble  to  "  A.  B.  or  order,"  and  A.  B.  himself  presents  it  at  the 
bank  for  payment,  the  strict  construction  of  the  phraseology 
of  the  check  would  entitle  him  to  receive  his  money  without 
indorsing.  Yet  it  is  customary  to  request  A.  B.  to  indorse. 
It  is  usually  understood  that  this  indorsement  is  intended  to 
operate  as  A.  B.'s  receipt  or  acknowledgment  that  he  has 
received  the  money,  and  if  such  be  the  intent  the  indorsement 
will  have  no  other  effect.^  If  it  be  intended  as  a  guaranty  of 
the  genuineness  of  the  check,  it  may  be  operative  as  such.  Or 
if  it  be  put  on  for  any  other  specific  purpose,  its  scope  and 

1  §  391.  Keene  v.  Beard,  8  C.  B.  N.  s.  372;  Bank  of  State  of  New 
York  V.  Muskingum  Branch  of  Bank  of  State  of  Ohio,  29  N.  Y.  632. 

2  Auberfc  v.  Walsh,  4  Taunt.  293;  Lloyd  v.  Sandilands,  Gow,  13; 
Keene  v.  Beard,  8  C.  B.  n.  s.  372;  Grant  on  Bankers  and  Banking,  p.  27; 
Byles  on  Bills,  p.  *24. 

639 


§  392  CHECKS   IN   GENERAL. 

consequences  will  be  limited  to  such  purpose,  at  least  in  the 
hands  of  any  person  having  knowledge  of  the  purpose.  For 
example,  where  A.  indorsed  a  check  in  the  iirm  style  of 
"  B.  &  C."  "  per  A.,"  and  the  cashier  of  the  drawee  bank  re- 
quired A.  to  identify  himself,  A.  went  out  with  the  check,  and 
returned  with  it  bearing  the  indorsement  of  D.,  and  presented 
it  in  this  shape  as  furnishing  a  sufficient  identification  of  him- 
self by  D.  Thercu})on  the  check  was  paid.  A.  had  in  fact  no 
authority  to  indorse  the  name  of  "  B.  &  C."  The  court  held 
that  D.,  by  his  indorsement,  had  undertaken  only  for  the  iden- 
tity of  A.,  not  for  A.'s  authority  to  indorse,  present,  and  col- 
lect the  check.^ 

But  when  a  check  was  drawn  payable  to  the  order  of  A., 
and,  in  consequence  of  its  dishonor  by  the  bank,  A.  was  sued 
by  a  subsequent  holder,  no  defence  was  suggested,  either  by 
counsel  or  by  the  court,  on  the  ground  that  A  might  not  have 
written  his  name  on  the  back  animo  indorsandi.  Nothing  was 
said  about  this,  but  he  was  treated  as  an  indorser  guaranteeing 
payment.  He  was,  however,  allowed  to  escape  on  the  ground 
that  the  check  had  not  been  presented  with  sufficient  prompt- 
ness after  his  indorsement  had  been  placed  upon  it.*  Also  it 
was  held  that  the  burden  of  showing  such  due  presentment 
was  on  the  plaintiff.  From  this  case  it  may  be  inferred  that 
the  presumption  is  that  the  indorser  of  a  check  intended  to 
guarantee  unless  some  other  intent  be  affirmatively  shown. 

§  392.  Effect  of  Indorsement  by  a  Lunatic.  —  B.  waS  a  luna- 
tic not  under  guardianship.  D.  obtained  by  fraud  his  indorse- 
ment of  a  certificate  of  deposit.  The  bank  that  purchased  the 
certificate  was  a  bona  fide  holder  for  value.  But  the  court 
held  that  no  holder  could  be  protected  in  such  case  any  more 
than  in  a  case  of  forgery,  as  the  essential  element  of  contract, 
viz.  assent,  was  wanting,  and  as  for  negligence  there  could  be 
none,  "for  one  who  is  incapable  of  prudence  cannot  be  guilty 
of  negligence."  ^ 

8  Commercial  Press  v.  Crescent  City  National  Bank,  2G  La.  An.  744. 
*  Vcazie  Bank  v.  Winn,  40  Me.  G2;  but  see  Emery  v.  Hobson,  62  id.  578. 
1  §  :i92.    An.f^lo-California  Bank  v.  Ames,  27  Fed.  Rep.  727.     See  Wire- 
bach  V.  First  National  Bank,  97  Pa.  St.  543. 

640 


INDORSEMENT  BY  LUNATIC.  §  392 

This  wc  think  an  error.  We  might  with  equal  force  say  that 
one  is  incapable  of  goodness  who  cannot  be  bad,  or  one  is  in- 
capable of  lying  who  cannot  tell  the  truth ;  on  the  contrary, 
that  is  just  what  they  are  capable  of.  The  aim  of  the  law  is 
to  favor  virtue,  prudence,  and  foresight,  and  throw  their  nat- 
ural consequences  upon  imprudence  and  imbecility  ;  and  only 
where  an  arm  of  protection  must  be  thrown  about  one  as  yet 
undeveloped,  not  because  he  is  weak  alone  (that  of  itself  is 
no  good  reason),  but  because  he  is  weak  now  and  promises 
strength  and  value  if  cared  for^  just  as  a  florist  cares  for  his 
budding  plants,  is  there  a  just  exception.  Applying  this  basic 
principle  to  the  case  of  lunacy,  if  wc  consider  only  the  lunatic 
and  the  bona  fide  holder,  there  is  certainly  no  reason  to  throw 
loss  upon  a  bona  fide  holder  in  case  it  must  be  borne  by  such 
holder  or  the  lunatic ;  let  the  latter  recover  from  the  wrong- 
doer if  he  can.  Virtue  and  sanity  should  not  be  burdened 
that  lunacy  may  lie  upon  the  lap  of  luxury,  but  the  natural 
consequences  of  lunacy  should  be  visited  upon  it.  If  B.  was 
only  a  little  below  par,  the  law  would  make  him  bear  the  con- 
sequence of  his  own  short-comings  and  so  help  nature  to  ex- 
terminate human  inferiority ;  but  if  he  is  entirely  gone,  the 
law,  according  to  the  above  decision,  will  nurse  him  and  pet 
him,  as  it  does  a  rosy  boy  who  bears  in  his  breast  a  future 
noble  manhood.  This  is  much  like  saying.  Let  us  throw  away 
an  apple  if  it  has  a  speck  in  it,  but  if  it  is  rotten  to  the  core 
let  us  eat  it. 

Moreover,  the  real  parties  benefited  by  such  decisions  are 
the  relatives  of  the  lunatic,  and  they  arc  surely  guilty  of  neg- 
ligence in  not  taking  better  care  of  him  ;  while  the  bank  had 
no  actual  notice,  nor,  as  the  indorser  was  not  under  guardian- 
ship, not  even  the  remotest  constructive  notice.  Negotiable 
paper  obtained  by  fraud  or  theft  is  good  in  the  hands  of  a 
bona  fide  holder.  "Why  does  such  a  case  as  this  call  for  more 
protection  ? 

But  although  the  reasons  assigned  for  the  decision  above 
will  not  bear  inspection,  it  is  nevertheless  true  that,  when  we 
consider  the  necessity  of  repressing  the  fraudulent  conduct  of 
those  wlio  take  advantage  of  lunacy,  the  case  wears  a  different 

VOL.  I.  41  041 


§  393  CHECKS   IN   GENERAL. 

aspect.  In  ordinary  cases  of  fraud,  commerce  may  be  left  free 
without  the  luuuperiug  requirement  that  each  new  taker  of 
negotiable  paper  shall  examine  the  circumstances  under  which 
previous  titles  were  acquired ;  the  interest  and  intelligence  of 
the  person  defrauded  may  well  be  relied  on  as  a  security 
against  such  conduct ;  but  when  these  barriers  are  burned 
away  by  the  fires  of  lunacy,  it  becomes  necessary  to  oppose 
the  tendency  to  fraud  with  the  interest  and  intelligence  of  the 
taker  of  the  paper.  It  is  better  that  commerce  should  be  a 
little  burdened,  than  that  the  door  of  fraud  should  be  left  wide 
open  with  no  sentinel  on  guard.  The  same  considerations 
apply  to  the  case  of  forgery  of  the  drawer's  or  maker's  name. 

§  393.  Checks  payable  to  Bearer.  —  Checks  written  payable 
to  bearer  pass  by  mere  delivery.  Prima  facie^  the  holder 
is  the  owner.  They  are  commercial  paper,  and,  as  such,  a 
valuable  consideration  is  presumed  until  proof  of  suspicious 
circumstances  is  introduced.  Also  it  is  presumed  that  they 
were  issued  by  the  maker.  Possession  is  jrrhna  facie  proof  of 
title ;  but  the  plaintiff  in  a  suit  upon  the  check  must  show 
that  he  received  it  for  value,  and  in  due  course  of  business.^ 
Even  where  a  check  was  not  addressed  to  any  particular  bank, 
it  was  yet  ruled  that  a  holder  for  value  might  recover  against 
tlic  drawer  on  a  count  for  money  had  and  received.^ 

A  check  payable  to  bearer  docs  not  require  indorsement. 
Nevertheless  it  may  be  indorsed,  and  the  indorsee  may  be 
hold  by  a  subsequent  holder,  as  may  also  the  indorsee  of  a 
check  payable  to  order.  To  this  end,  however,  the  animus 
indorsando,  the  indorscr's  intent  to  render  himself  liable  as  a 
guarantor,  must  appear  or  be  shown.  This  is  by  no  means  a 
necessary  inference  from  the  mere  writing  of  the  name  across 
the  back  of  the  instrument,  which  may  often  be  done  for  other 

1  §  393.  Byles  on  Bills,  p.  *1S;  Keene  v.  Beard,  8  C.  B.  n.  s.  372; 
Words  V.  Schroeder,  4  Ilarr.  &  J.  276;  Cruger  v.  Armstrong,  3  Johns. 
Cas.  5;  Conroy  v.  "Warren,  id.  239;  Merchants'  Bank  v.  Spicer,  6  Wend. 
445;  Sutcliffe  v.  McDowell,  2  N.  &  M.  251;  Murray  i'.  Judah,  6  Cow. 
484;  Glen  v.  Noble,  1  Blackf.  104;  Humphries  r.  Bickness,  2  Litt.  299; 
Shrieve  v.  Duckham,  1  id.  194;  Mauran  v.  Lamb,  7  Cow.  174;  Hoyt  v. 
Seeley,  18  Conn.  353. 

2  Ellis  V.  Wheeler,  3  Pick.  18. 

642 


CHECKS   PAYABLE   TO    BEARER.  §  393 

purposes.  Thus  in  England  it  is  customary  for  the  holder  of 
a  check,  upon  receiving  })ayment  of  the  same  from  the  banker, 
to  write  his  name  upon  the  back,  and  the  usage  of  business 
gives  to  this  simi)ly  the  signification  of  his  receipt  for  the 
money.  Such  an  indorsement  of  course  creates  no  liability  of 
any  description  further  than  that,  if  any,  which  could,  under 
the  peculiar  circumstances  of  any  individual  case,  grow  out  of 
a  receipt  expressed  in  full,  in  ordinary  form.^ 

It  seems  that,  as  between  the  holder  and  indorser  of  a  check, 
diligence  in  presentment  must  be  used  to  enable  the  former 
to  hold  the  indorser  in  the  event  of  dishonor.*  But  notice  of 
nonpayment  apparently  need  not  be  given  to  the  indorser 
with  any  especial  promptitude,  provided  actual  loss  is  not 
caused  to  him  by  the  delay .^ 

Checks  are  commercial  paper,  and  are  generally  affected 
by  the  rules  which  affect  commercial  paper.  Thus  the  holder 
of  a  check  payable  to  bearer,  or  indorsed  in  blank,  is  pre- 
sumed to  be  the  owner,  bona  fide,  and  for  value.  It  is  only 
after  proof  that  the  original  issue  of  the  check  was  a  fraud, 
or  that  it  was  lost  by  the  drawer  before  issue,  that  such  a 
holder  will  be  required  to  show  his  bona  fides,  to  prove  that 
he  has  given  value  for  the  check,  and  that  he  has  come  into 
possession  of  it  in  the  usual  course  of  business.  If,  being 
obliged  to  show  these  facts,  he  does  so  successfully,  it  then 
makes  no  difference  under  what  circumstances  of  fraud  or 
loss  the  check  originally  left  the  drawer's  hands  ;  the  holder 
shall  retain  and  shall  recover  upon  it,  at  least  as  much  as  he 
has  paid  for  it.  Even  where  in  the  chain  of  title  there  is  a 
gift,  known  to  the  holder,  who  nevertheless  had  no  reason  to 
suspect  any  irregularity  for  this  reason,  and  who  paid  value 

8  Aubert  i;.  Walsh,  4  Taunt.  293 ;  Lloyfl  v.  Sandilands,  Gow,  13;  Keene 
1'.  Beard,  8  C.  B.  n.  s.  372;  Grant  on  Bankers  and  Banking,  p.  27;  Byles 
on  Bills,  p.  *24. 

*  Little  V.  Phoenix  Bank,  2  Hill,  (N.  Y.)  42'};  3  Kent's  Coram.  *105, 
note  c. 

6  Small  V.  Franklin  Mining  Co.,  99  Mass.  277.  It  must  be  acknowl- 
edged that  this  is  not  a  very  satisfactory  case,  either  in  the  decision  or  in 
the  opinion. 

643 


§  393  CHECKS   IN   GENERAL. 

ill  the  due  course  of  business,  he  sliall  still  hold  and  recover.^ 
These  j)rincij)les  of  law  will  be  found  fully  elucidated  and  car- 
ried out  in  all  their  details  in  works  on  bills  and  notes.  They 
are  usually  discussed  in  considering  questions  which  arise  be- 
tween the  maker  or  drawer  of  the  paper  and  a  subsequent 
holder  thereof.  The  general  principles  are  broadly  stated  here, 
simply  because  from  them  follows  as  an  unavoidable  corol- 
lary, the  rule  that  if  a  bank  pays  a  check  payable  to  bearer 
or  indorsed  in  blank,  upon  presentment,  to  the  holder  thereof, 
liaving  at  the  time  no  reasonable  cause  for  suspecting  any 
irregularity  or  any  cause  for  refusing  such  payment,  it  will  be 
protected  in  doing  so,  no  matter  what  facts  unknown  to  it 
may  have  occurred  prior  to  the  presentment.  Even  if  the 
party  presenting  be  the  very  individual  who  stole  the  check, 
before  issue,  from  the  drawer,  or  who  found  it  after  the 
drawer  had  lost  it,  still,  since  the  bank  has  no  possible  oppor- 
tunity of  learning  these  facts,  the  drawer  shall  suffer  the  loss. 
A  check  payable  to  bearer  or  payable  to  order,  and  indorsed 
by  the  payee  in  blank,  passes  by  delivery,  just  as  fully  and  as 
freely  as  a  bank  note.'^  Neither  docs  the  rule  of  law,  that  an 
order  or  bill  drawn  on  a  particular  fund  is  not  negotiable, 
cover  the  case  of  a  check ;  for  this  is  drawn  not  against  a 
particular  fund,  but  against  a  general  credit  or  account.^  It 
might  be  added,  too,  that  the  custom  of  the  banking  business, 
which  has  been  sometimes  held  even  to  give  the  holder  of  a 
check  a  right  of  action  thereon  against  the  bank,  authorizes 
the  negotiability,  and  renders  it  part  of  the  contract  between 
the  bank  and  the  depositor  that  his  checks  shall  be  paid  when 
presented,  no  matter  through  how  many  hands  they  may  have 
passed  in  the  course  of  business  negotiation. 

^  Fuller  V.  Ilutchings,  10  Cal.  523;  Case  v.  Mechanics'  Banking  Asso- 
ciation, 4  Comst.  106;  Ross  v.  Bedell,  5  Duer,  462;  Goodman  r.  Simonds, 
20  How.  313  (case  of  a  bill  of  exchange);  Gray's  Adniinistrator  v.  Bank 
of  Kentucky,  29  Pa.  St.  365  (do);  Fulweiler  v.  Hughes,  17  id.  440; 
Stephens  v.  McNeil,  26  Barb.  651;  Townsend  v.  Billinge,  1  Hilton, 
353. 

'  Munn  V.  Burch,  25  III.  35. 

8  Keene  v.  Beard,  8  C.  B.  n.  s.  372. 
644 


TRANSFER   BY   MAIL.  §  395 

§  394.  Money  given  to  Dravrer  of  Worthless  Check.  —  Where 
money  is  paid  to  a  person  in  exehaiige  for  his  own  check, 
which  is  worthless,  and  is  known  to  him  at  the  time  of  the 
transaction  to  he  worthless,  the  title  to  the  money  neverthe- 
less passes  to  him.  This  rule  was  laid  down  in  bankruptcy 
proceedings ;  the  person  who  gave  the  check  upon  his  bankers 
(who  had  for  some  time  refused  to  honor  his  checks)  went 
into  bankruptcy,  and  the  party  to  whom  he  gave  it,  and  wlio 
gave  him  cash  for  it,  filed  a  petition  for  reimbursement  in 
full,  on  the  ground  that  the  title  to  the  money  did  not  pass. 
But  the  court  held  that  the  title  did  pass  in  spite  of  the  known 
worthlessness  of  the  check,  that  the  money  was  part  of  the 
general  assets  of  the  bankrupt,  and  that  the  check-holder 
could  only  come  in  as  an  ordinary  creditor  and  take  his 
dividend.^ 

§  395.  Transfer  of  Check  sent  by  Mail.  —  The  title  is  in  the 
sender  until  the  check  comes  to  the  hands  of  the  drawee, 
unless  the  latter  has  requested  the  sender  to  forward  money 
to  him  by  mailed  check  ;  in  that  case,  the  title  vests  in  the 
drawee  when  the  check  is  placed  in  the  mail  according  to  his 
instructions.^ 

If  a  depositor  requests  the  bank  to  remit  by  draft,  and  the 
bank  addresses  the  remittance  according  to  the  address  con- 
tained in  the  letter  of  the  depositor,  it  is  not  liable.  The  risk 
of  transmission  is  upon  the  depositor.^ 

If  A.  directs  B.  to  send  money  by  check,  and  B.  puts  a 
letter  containing  the  check  in  the  post,  properly  directed,  it 
becomes  at  once  the  property  of  A.^ 

Where  A.  in  London  wrote  to  B.  in  Suffolk,  asking  "  to  be 
favored  with  a  check  in  the  course  of  a  week,"  and  the  check 
was  stolen  in  transit  and  paid  on  a  forged  indorsement,  it 

1  §  304.    In  re  King,  8  Nat.  Bankr.  Reg.  285  (Ga.). 

1  §  395.  Talbot  v.  Bank  of  Rochester,  1  Hill,  (N.  Y.)  295;  Graves  u. 
American  Exchange  Bank,  17  N.  Y.  208. 

2  Jung  V.  Second  Ward  Savings  Bank,  55  Wise.  364  (1882).  See  First 
National  Bank  v.  McManigle,  69  Cal.  156;  Gurney  v.  Howe,  9  Gray,  404; 
Warwicke  v.  Noakes,  Beake  N.  P.  98;  Burr  i'.  Sickles,  17  Ark.  428. 

3  Indiana  National  Bank  v.  Holtschaw,  98  Ind.  87. 

645 


§  30r»  CHECKS   IN   GENERAL. 

was  lit'M  that,  as  tlie  distance  was  too  great  to  send  a  special 
messenger  with  the  check,  the  debtor  was  entitled  to  regard 
the  request  as  an  order  to  send  by  mail,  and,  having  con- 
formed U)  this  implied  command,  the  post-office  was  the  agent 
of  both  parties,  and  judgment  must  be  entered  for  the  debtor 
in  a  suit  by  A.  to  I'ccover  the  money.*  The  loss  as  l)etween 
A.  and  B.  very  properly  fell  upon  A.,  as  it  was  a  loss  without 
IJ.'s  fault,  and  falling  upon  the  property  of  A.  Bes  perit 
domino. 

A.  sent  a  check  on  tlie  B.  bank  to  the  said  bank,  saying, 
"  Please  send  me  a  check  on  some  Boston  bank  for  the  en- 
closed check."  B.  sent  by  mail  a  check  drawn  by  C.  on  a 
Boston  bunk,  and  the  balance  in  currency.  It  was  lost,  and 
C.  would  not  give  a  duplicate.  Held,  that  the  bank  should 
have  sent  its  own  check  for  the  whole.  A  check  was  less 
liable  to  be  stolen  tlian  bills,  and  if  its  check  had  been  lost  it 
could  have  been  duplicated  without  depending  on  the  will  of 
a  third  person.  A.  recovered  in  a  suit  for  money  had  and 
received.^ 

§  395  A.  Lost  Checks.  —  If  a  check  be  lost  by  the  lawful 
owner  thereof,  and  subsequently  come  into  the  hands  of  a 
bona  fide  liolder  for  value  and  without  notice,  he  will  be  en- 
titled to  receive  the  amount  from  the  bankers.  If  they  refuse 
to  pay  him,  by  reason  of  instructions  to  this  effect  given  them 
by  the  drawer,  the  holder  may  recover  the  amount  from  the 
drawer.^ 

The  fact  that  a  check  has  not  been  presented  or  paid,  and 
has  been  presumably  lost  after  delivery  by  the  drawer  to  the 
payee,  and  after  it  had  been  sent  by  the  payee  to  a  third 
party,  does  not  constitute  a  sufficient  consideration  for  the 
drawer's  promise  to  such  third  person  to  give  him  a  new 
check  for  the  like  amount.^  But  it  seems  that,  under  strong 
circumstances  of  equity  and  necessity,  the  drawer  might  be 
compelled  to  give  a  new  check  in  place  of  a  lost  one,  upon 

*  Xorman  v.  llicketts,  Lond.  Bk.  Mag.,  June,  1886,  p.  497. 

6  Ames  V.  York  National  Bank,  10.3  Mass.  320. 

1  §  395  A.    Grant  v.  Vaughan,  3  Burr.  1525, 1526;  3  T.  11.  177,  182. 

'  John.s  V.  Mason,  9  Hare,  29. 

646 


LOST   CHECKS.  §  395 

receiving  a  proper  indemnity  from  tlic  third  party  from  whose 
possession  the  check  was  lost.^ 

So  where  the  lost  or  destroyed  check  was  one  issued  by  the 
accountant-general  in  chancery,  and  had  been  so  long  out- 
standing that  it  would  not  be  paid  upon  presentment,  the 
Court  of  Chancery  ordered  a  new  check  to  be  issued.* 

If  a  check  given  in  absolute  payment  by  clear  agreement 
is  lost,  and  paid  on  a  forged   indorsement,  the  true  owner 
can  recover  of  the  bank,  but  not  of  the  drawer,   check  paid 
In  case  the  check  was  taken  without  special  agree-  *»  JJ^®  ^™"e 
ment,  and  was  therefore  only  conditional  payment,    Payee's 
we  think  the  same  rule  should  hold.     The  drawer   ^^"^^  ^' 
has  done  his  duty  ;  it  is  through  no  fault  of  his  that  the  payee 
does  not  get  his  money  ;  the  very  payment  of  the  check  proves 
that  the  drawer  was  faultless  in  his  undertaking ;  the  check 
was  good  for  the  money,  and,  if  accident  or  fraud  deprive  the 
holder  of  it,  surely  the  loss  should  remain  upon  him,  rather 
than  on  the  drawer.     Only  by  leaving  losses  where  they  fall 
as  to  innocent  parties  can  care  be  encouraged ;  but  in  most 
cases  the  payee  could  recover  from  the  bank. 

However,  in  New  York  it  is  thought  that  the  holder  should 
recover  of  the  drawer,  except  where  the  check  was  taken  in 
absolute  extinguishment  of  the  debt.^ 

8  Rhodes  v.  Morse,  U  Jur.  800. 
*  Taylor  v.  Scrivens,  1  Beav.  571. 

6  Thompson  v.  Bank,  82  N.  Y.  8.  See  the  account  of  Norman  r. 
Ricketts  under  "  Title  to  Check  sent  by  Mail." 

647 


CHAPTER  XXVIII. 

REVOCATION    OF   CHECKS. 

§  396.  Analysis. 

(1)  By  Codntermand. 

§  397.  Good  against  a  donee  or  mala  Jide  holder,  or  when  the  condition  of 

§  398,  delivery  is  not  fulfilled. 

Otherwise,  the  drawer  has  no  right  to  revoke  as  against  a  bona  Jide 
holder ;  hut  if  he  does,  tiie  best  opinion  is  that  it  is  a  question  be- 
tween himself  and  the  holder,  with  which  the  bank  has  nothing  to 
do,  and  that  it  should  maintain  strict  neutrality,  as  in  the  case  of 
any  other  adverse  claim,  paying  neither  party  till  it  is  secured  or 
tlie  question  settled. 
§  398.         Authority,  however,  is  in  conflict. 

Illinois  holds  that  a  countermand  is  no  excuse  to  a  bank  for 

refusal  to  pay. 
Most  courts  Ijold  that  the  bank  must  obey  the  countermand  if 
received  before  payment  or  acceptance,  and  that  the  funds 
remain  under  the  entire  control  of  the  depositor. 
§  399.  Power  to  revoke  ceases  with  certification,  but  the  certification  must 

be  complete.  If  the  check  is  only  marked,  and  not  yet  delivered 
when  the  notice  of  revocation  is  received  by  the  bank,  no  liability 
lias  been  incurred  by  the  bank,  and  the  revocation  takes  effect. 

(2)  By  Death.     See  §§  549-551. 

§  400.  The  death  of  the  drawer  is  usually  held  a  revocation  of  the  bank's 

authority  to  pay  his  uncertified  checks,  but  the  reason  of  the  case 
la  all  the  other  way,  and  it  is  to  be  hoped  the  law  will  soon  be 
cured  by  legislative  medicine.  One  who  takes  a  check  from  a 
man  doing  business  alone  may  have  to  wait  two  or  three  years  to 
get  his  money,  till  the  estate  of  the  drawer  can  be  settled  up,  if 
the  drawer  dies,  and  the  drawee  knows  it  before  presentment. 

(3)  By  Insolvency  of  Drawer. 

§  400  A.      Bank's  authority  to  pay  on  the  depositor's  uncertified  order  ceases 
upon  notice  of  his  insolvency. 

§  397.  Revocation  of  a  Check.  —  By  Countermand.  —  By 
Death. —  Tliis  i.s  a  subject  upon  whicli  authorities  conflict. 
The  Illinois  doctrine  is,  that  the  order  of  a  drawer  to  the  bank 
not  to  honor  a  certain  check  (A.)  is  no  sufficient  excuse  to 
the  bank  for  refusal  to  pay  the  same  when  subsequently  pre- 
648 


COUNTERMAND.  §  397 

sented.  The  general  current  of  autliority  is  very  strong  to  the 
effect  that  the  drawer  may  countermand.  And  much  as  we 
hesitate  to  differ  with  the  Illinois  courts,  which  seem  perhaps 
the  least  hampered  with  mere  technicalities  and  the  most  open 
to  the  light  of  reason  and  modern  life  of  any  of  the  State  judi- 
ciaries, yet  we  think  in  this  matter  the  pendulum  has  swung 
too  far.  The  drawer  can  make  a  subsequent  check,  B.,  and, 
by  presenting  it  before  the  check  A.,  cut  off  the  latter ;  or  he 
can  order  the  bank  to  transfer  his  deposit  to  the  account  of 
another  depositor,  or  to  hold  it  as  a  special  or  specific  deposit, 
as  for  the  payment  of  a  note,  or  to  transmit  it  at  once  to  some 
point,  and  when  A.  is  presented  after  such  order  has  come 
to  the  bank,  the  check  will  not  be  paid  because  of  insufficient 
unincumbered  funds.  And  not  only  can  the  drawer  in  other 
ways  accomplish  the  purpose  of  a  direct  countermand,  but 
even  if  he  could  not,  the  question  is  properly  one  that  lies  en- 
tirely between  the  depositor  and  the  check-holder,  and  with 
which  the  bank  should  not  be  called  upon  to  interfere. 

A  countermand  may  be  upon  good  cause,  as  when  a  check 
is  a  gift,  or  was  not  to  take  effect  except  on  some  condition 
that  has  failed.  Is  the  bank  to  be  required  at  its  peril  to  look 
into  such  questions  ?  Must  it  pay  at  peril  of  accounting  to 
the  drawer  if  his  order  was  proper,  or  refuse  to  pay  in  peril 
of  accounting  to  the  holder  if  the  order  was  improper  ?  We 
think  it  is  clear  that  the  business  of  the  bank  should  not  be 
hampered  in  such  manner,  and  that  the  only  safe  course  is 
to  hold  in  all  cases  of  adverse  claims  that  the  bank  may  keep 
the  fund  until  the  parties  settle  the  question  between  them- 
selves, or  one  of  them  gives  the  bank  a  satisfactory  bond  of 
indemnity. 

Perhaps  a  good  plan  would  be  to  allow  the  depositor  a  cer- 
tain number  of  days  to  deposit  a  bond  in  some  court,  with  the 
provision  that  on  order  from  the  court  the  bank  should  hold 
the  deposit  free  from  the  claim  of  the  check,  and  if  the  depos- 
itor did  not  avail  himself  of  the  privilege,  then  the  holder 
might  do  the  same;  but  in  no  case  ought  the  bank  to  be 
subject  to  suit  except  for  improperly  paying  the  fund  with 
notice  of  an  adverse  claim. 

649 


§  398  REVOCATION    OF   CHECKS. 

§  398.  Cases  on  Countermand.  —  A  check  is  simply  a  written 
order  of  a  depositor  to  his  bank  to  make  a  certain  payment. 
It  is  executory,  and  as  such  it  is  of  course  revocable  at  any 
time  before  the  bank  has  paid  or  committed  itself  to  pay  it. 
lint  after  the  bank  has  paid,  or  has  placed  itself  under  an 
obli<;ation,  or  has  incurred  a  liability  to  comply  with  the  order, 
the  di'awcr's  power  to  revoke  is  at  an  end.  Thus,  after  the 
l»ank  has,  by  acceptance  of  the  check,  directly  undertaken 
and  promised  the  holder  to  honor  it,  the  drawer  is  as  much 
de])rived  of  his  right  to  countermand  it  as  if  actual  payment 
had  been  made.  The  remark  once  fell  from  Judge  Story, 
in  the  oft-cited  Matter  of  Brown,  that  the  drawer  of  a  check 
had  no  right  to  countermand  payment  at  the  bank.  It  was 
obvious  from  the  context,  that  the  judge  referred  rather  to 
moral  right  than  to  legal  right.  He  meant,  simply,  that  a 
debtor  who  had  given  to  his  creditor  a  check  in  payment  of 
the  debt  had  no  right  as  towards  that  creditor,  "  right "  be- 
ing considered  as  a  matter  of  honesty,  to  order  nonpayment 
of  the  check.  The  language  of  the  judge,  taken  in  isolation 
from  the  circumstances  of  the  case,  and  from  the  remainder 
of  the  opinion,  seems  to  admit  a  different  meaning,  and  is 
therefore  capable  of  a  misinterpretation  and  misuse,  which 
have  sometimes  been  feebly  attempted.  But  if  such  a  mis- 
understanding is  possible,  still  the  authorities  to  the  contrary 
effect  are  numerous,  and  leave  no  shadow  of  doubt  upon  the 
point.  The  bank  is  the  drawer's  agent.  Its  primary  duty  is 
to  hold  or  to  pay  his  money  as  he  directs.  Primarily  it  owes 
no  duty  to  the  holder,  except  under  and  by  virtue  of  direc- 
tions from  the  drawer.  Until,  by  reason  of  these  directions, 
it  lias  assumed  voluntarily,  or  by  action  of  law  has  involun- 
tarily come  under,  secondary  and  superseding  obligations  to 
the  holder,  the  latest  orders  from  the  drawer  govern  its  right 
to  act  on  his  behalf.^     It  may  often  be  not  only  the  lawful 

1  §  398.  Gibson  v.  Minet,  2  Bing.  7;  1  Car.  &  P.  2-17;  R.  &  M.  68; 
9  Moore,  31;  Dykers  v.  Leather  ISIanufacturers'  Bank,  11  Paige,  612; 
Scott  V.  Porcher,  4  Meriv.  652;  Lilly  v.  Hays,  5  Ad.  &  E.  548;  Walker  v. 
Rostron,  9  M.  &  W.  411;  Malcolm  v.  Scott,  5  Exch.  601;  Williams  v. 
Everett,  14  East,  582;  Fruhling  v.  Schroeder,  2  Bing.  N.  R.  77;  Morrell 
650 


COUNTERMAND.  §  398 

rio-ht  of  the  drawer  of  the  check,  as  towards  the  bank,  to 
revoke  the  bank's  authority  to  pay  before  presentment  of  the 
check;  but  it  may  be  also  his  moral,  as  well  as  his  lawful 
right.  An  instance  of  this  kind  occurred  where  a  dispute 
arose  between  a  creditor  and  an  agent  of  a  foreign  debtor  as 
to  interest.  At  last  the  creditor  agreed  to  accept  the  principal 
and  give  a  receii)t  in  full.  No  sooner  however  had  he,  upon 
these  terms,  received  the  agent's  check  for  the  principal,  than 
he  declared  his  intention  to  sue  the  debtor  abroad,  in  the  debt- 
or's own  country,  for  the  interest.  Tlie  debtor's  agent  at  once 
stopped  iiaymcnt  upon  the  check,  and  Lord  Ellenborough  up- 
held him  in  so  doing,  saying  that  the  delivery  of  the  check 
was  made  upon  a  condition  which  it  at  once  appeared  that  the 
payee  intended  to  elude.  The  delivery  was  conditional,  and 
"  all  still  remained  in  JierV  The  stoppage  of  payment  was 
justifiable,  and  rendered  the  draft  "  a  piece  of  waste  paper  " 
in  the  payee's  hands.^ 

The  cited  case  of  Gibson  v.  Minet  affords  a  very  strong 
illustration  of  the  drawer's  power  of  revocation.  An  order 
was  given  by  the  customer  to  his  banker  in  the  following 
terms :  — 

«  Waterford,  July,  1822. 

"  I  request  you  to  hold  over  4001.  from  my  private  account 
to  the  disposal  of  J.  Mintern  &  Co.  Wm.  Gibson. 

"  Messrs.  Minet  &  Stride." 

This  order  was  delivered  to  a  partner  in  the  house  of  Min- 
tern &  Co.  on  July  8,  and  to  Messrs.  Minet  &  Stride  on  July 
13.  The  drawer  had  funds  to  his  credit  to  the  amount  called 
for.     Upon  the  receipt  of  it,  one  of  the  bankers  wrote  upon 

V.  Wootten,  16  Beav.  197,  which  holds  even  that  the  rule  is  not  affected  by 
the  fact  that  the  person  in  whose  favor  the  order  was  drawn  had  no  knowl- 
edge of  it,  and  no  power  to  take  advantage  of  it  at  any  time  prior  to  the 
revocation.  Brind  v.  Hampshire,  1  M.  &  W.  372;  also  to  the  same  effect, 
Grant  on  Bankers  &  Banking,  109 ;  Story  on  Promissory  Notes,  §  498 ; 
citing  Purchase  v.  Mattison,  6  Duer,  587;  Lovett  i;.  Cornwell,  6  Wend. 
369  ;  1  Hall,  56;  Jacks  u.  Darrin,  3  E.  D.  Smith,  557. 

2  Wienholt  v.  Spitta,  3  Camp.  376.  But  see  Watson  v.  Russell,  3  B. 
&  S.  34;  31  L  J.  Q.  B.  304. 

651 


R  3Q8  REVOCATION    OF   CHECKS. 

the  debit  side  of  Gibson's  account :  "  N.  B.  By  Mr.  Gibson's 
letter  of  the  8th  July,  1822,  400Z.  is  to  be  held  at  the  disposal 
of  Messrs.  J.  Mintern  &  Co."  Mintern  &  Co.  were  customers 
with  the  same  banker.  On  March  19,  1823,  Gibson  notified 
the  bankers  that  he  countermanded  the  order.  The  bankers 
immediately  notified  Mintern  &  Co.,  and  desired  instructions. 
Mintern  &  Co.  replied,  requiring  the  amount  to  be  carried  to 
their  credit,  and  the  bankers  complied,  and  notified  Gibson. 
The  jury  found  that  the  order  to  the  bankers  was  executory, 
and  had  not  been  acted  upon  at  the  time  of  the  countermand, 
and  the  court  held  that  the  countermand  was  therefore  in 
season,  and  good. 

Another  recent  English  case,  also,  well  illustrates  the  opera- 
tion of  the  doctrines  of  this  section,  A  debtor  gave  a  check 
in  payment  of  his  indebtedness.  Before  presentment  of  the 
check,  garnishee  process  was  served  on  him  in  a  suit  against 
the  payee.  The  drawer  at  once  countermanded  his  check,  and 
directed  that  it  should  not  be  paid.  The  court  held  that  by 
this  stopping  payment  on  the  check  the  original  debt  from  the 
drawer  to  the  payee  was  revived,  and  was  held  by  the  gar- 
nishee process.^ 

Of  course,  so  long  as  the  drawer  retains  the  right  to  counter- 
mand payment  upon  a  check,  he  also  retains  the  right  himself 
to  draw  out  any  and  all  funds  to  his  credit  upon  which  the 
bank  has  no  lien,  or  which  have  not  been  attached  or  seques- 
tered by  legal  process.  The  question  in  each  case  alike  is 
merely  of  his  right  to  control  the  deposit.  This  right  he  pos- 
sesses until  the  bank  has  paid  it  out,  or  promised  or  become 
bound  to  pay  it  out,  upon  some  order  emanating  from  him 
and  presented  for  payment  or  acceptance  at  the  bank  counter, 
or  until  the  operation  of  law  intervenes  by  reason  of  some  pro- 
cess. It  is  a  matter  of  no  consequence  how  many  checks  are, 
with  tlie  knowledge  of  the  bank,  outstanding  in  the  hands  of 
liis  creditors  at  tlic  time  of  his  counter  direction  or  demand  of 
pnyment  of  the  whole  fund  to  himself.  The  bank  is  not,  and 
has  no  right  to  constitute  itself,  the  agent  of  these  parties, 
however  honest  may  be  their  claims  or  hard  their  case.  It  not 
8  Cohen  v.  Ilule,  3  Q.  B.  D.  371. 
652 


COUNTERMAND.  §  399 

only  owes  them  no  duty,  but  it  has  not  even  any  legal  power  to 
act  in  their  behalf. 

The  drawer  can  countermand  an  uncertified  check  before  it 
is  paid,  and  take  on  himself  the  consequences.*  But  after  it  is 
paid  to  a  bona  fide  holder  for  value,  neither  drawer  nor  bank 
can  recall.^ 

But  if  the  clieck  is  once  certified,  the  drawer's  power  of 
revocation  ceases,  just  as  if  payment  had  been  made,  for  the 
bank  is  now  the  debtor.^  Of  course,  this  would  not  apply 
where  the  drawer  had  a  check  certified  before  delivery,  until 
he  should  issue  the  paper. 

In  Illinois  it  is  no  defence  for  a  bank  that  the  drawer  has 
countermanded ;  ^  it  must  pay  a  bona  fide  holder  for  value,  in 
spite  of  the  drawer's  order,  for  it  is  fraud  in  the  drawer  to  re- 
voke just  as  much  as  to  withdraw,  and  a  fraudulent  command 
can  be  no  excuse  for  the  bank's  failure  of  duty.  The  trouble  is, 
the  bank  ought  not  to  be  called  on  to  judge  whether  the  order 
is  a  fraud  or  not. 

§  399.  Certification  v.  Revocation.  —  While  the  check  is  or- 
dinarily executory,  and  revocable,  and  the  drawer  may  coun- 
termand its  payment,  when  the  bank  has  certified  the  check, 
and  thereby  comes  under  obligation  to  the  holder  to  pay  it  on 
presentment,  the  power  to  revoke  ceases,  as  effectually  as  if 
actual  payment  had  been  made.  The  drawer's  authority  over 
the  funds  on  Avhich  it  is  drawn  terminates  pro  tanto.  The 
same  effect  is  produced  when  the  law,  by  proper  legal  process, 
intervenes,  and  attaches  or  sequesters  the  fund.^  The  notices 
by  which  the  drawer  forbade  the  garnishees  to  collect  the 
check,  and  the  defendant  revoked  their  authority  to  present  it 
for  payment,  having  been  given  after  the  certification  of  the 
check,  and  after  the  service  of  the  garnishment,  were  ineffect- 
ual to  change  the  rights  of  the  plaintiff,  or  to  displace  any 
lien  acquired  by  the  legal  process.^ 

4  Abbers  v.  Commercial  Bank,  85  Mo.  173  (1884);  Saylor  v.  Bushong, 
100  Pa.  St.  23. 

5  Ibid. ;  National  Commercial  Bank  v.  Miller,  77  Ala.  168. 

8  Union  National  Bank  i;.  Oceana  County  Bank,  80  111.  212. 
1  §  399.    National  Commercial  Bank  v.  Miller,  77  Ala.  168. 

653 


§  400  REVOCATION    OF   CHECKS. 

Where  a  bank  had  marked  a  clieck  "  good,"  but  while  still 
in  the  bank's  possession,  and  before  it  had  delivered  the  certi- 
Deiivery  is  lied  check  to  the  holder,  an  order  was  received  from 
make'"he  '"  tlio  drawcr  revoking  the  check,  it  was  held  that  the 
nMdVi'<x'a-  ^^"^  "^"^*  ^^^^y  ^^^^  order.  It  had  incurred  no  lia- 
tion  i)efore  bllitv,  for  dclivcrv  of  the  check  after  certification 
binding.  was  ncccssarv  to  raise  the  obligations  imported  by 
a  certified  check  in  the  hands  of  a  holder.  And  having  in- 
curred no  liability,  it  was  not  free  to  create  one  by  delivery  in 
violation  of  the  drawer's  orders,  and  then  expect  him  to  bear 
the  consequence.^ 

§  400.  Revocation  by  Death.  —  It  is  perfectly  clear,  that, 
where  a  check  o{)crates  as  an  assignment,  the  death  of  the 
drawer  will  not  revoke  it.  "  Whether  it  be  with  or  without 
consideration,  a  right  once  vested  cannot  be  divested  by  the 
death  of  the  party  from  whom  it  was  acquired."  ^ 

It  is  also  clear,  that  if  a  bank  pays  a  check  after  the  death 
of  the  drawer,  being  in  ignorance  of  that  event,  the  payment 
is  good,  and  the  bank  not  liable,^  upon  the  general  principle, 
that  revocation  of  an  agent's  authority  by  death  of  a  prin- 
cipal takes  effect  as  to  the  agent  only  from  the  time  the  agent 
has  notice  of  it. 

But  if  the  bank  knows  of  the  death  of  the  drawer,  its  right 
to  pay  his  checks  has  vanished ;  so  say  the  authorities  that  do 
not  regard  a  check  as  an  assignment.^     Tlie  title  to  the  de- 

2  Freund  v.  Importers  &  Traders'  National  Bauk,  3  Hun,  689.  See  12 
Hun,  5:37. 

^  §  400.  In  substance  taken  from  Lewis  v.  International  Bank,  13 
Mo.  App.  207. 

2  2  Parsons  on  Notes  and  Bills,  82.     See  next  note. 

'  Tate  V.  Hilbert,  2  Ves.  Jr.  118.  In  this  case  the  check  was  a  gift. 
See  dictum  in  Burke  v.  Bishop,  27  La.  An.  465. 

The  death  of  the  drawer  before  presentment  of  the  check  operates  as 
an  absolute  revocation  of  the  power  of  the  bank  to  pay  upon  his  check. 
At  the  instant  of  his  death  the  title  to  his  balance  vests  in  his  legal  repre- 
sentatives, and  his  own  order  is  no  longer  competent  to  withdraw  any 
part  of  that  which  is  no  longer  his  own  property.  (Tate  v.  Hilbert,  2 
Ves.  Jr.  111.)  It  has  been  laid  down  in  the  text-books,  quite  generally, 
that,  if  the  payment  be  made  by  the  bank  in  ignorance  of  the  death  of  the 
drawer,  the  bank  will  be  protected.  (Grant  on  Bankers  and  Banking, 
654 


DEATH    OP   DRAWER.  §  400 

posit  passes  to  the  representatives,  and  can  be  drawn  only  on 
their  order.  And  it  is  further  said,  that  the  bank's  authority 
as  agent  is  terminated  by  the  drawer's  death. 

This  we  consider  to  be  a  perversion  of  reason,  whatever  may 
be  the  view  taken  of  the  question  of  assignment,  — 

(1)  It  is  inconsistent  to  hold  that  a  general  deposit  is  a 
debt,  and  that  the  bank  is  not  an  agent  or  trustee  or  bailee  in 
respect  to  it,  and  then,  just  to  bolster  up  this  error,  turn  com- 
pletely about  and  say  the  bank  is  an  agent,  and  must  be  gov- 
erned by  the  rules  of  agency. 

(2)  Even  admitting  the  claim  that  the  rules  of  agency  are 
to  control,  it  may  be  answered,  that  an  agency  clearly  intended 
to  be  good  after  death  is  so  held  ;  as  where  goods  are  delivered 
to  B.  to  be  given  to  C.  on  the  death  of  the  donor. 

(3)  The  death  of  the  drawer  of  a  bill  of  exchange  works  no 
revocation  :  wliy  should  a  different  rule  obtain  as  to  checks  ?  * 

(4)  The  personal  representatives  take  the  property  of  the 
deceased,  subject  to  all  proper  claims  against  it.  It  is  a  fraud 
in  the  drawer  to  withdraw  his  funds  during  life,  so  as  to  pre- 
vent payment  of  the  check.  Is  it  any  less  a  fraud  for  the 
representative  to  do  the  same,  or  for  the  law  to  do  it  in  the 
name  of  technical  fallacy  ? 

(5)  It  places  the  obligation  of  a  check  outside  the  general 
rules  and  reasons  of  the  law.  The  holder  may  sue  the  drawer 
on  a  check ;  it  is  a  binding  contract.  Why  should  this  con- 
tract obligation  be  lessened  by  death  more  than  others,  or  the 
right  of  the  holder  to  demand  payment  of  the  bank,  or  of  the 
bank  to  pay  in  precise  accord  with  the  contract  evidenced  by 
the  check,  be  affected  ? 

(6)  Men  who  do  business  alone  are  put  at  great  disad- 

p.  48,  n.;  Byles  on  Bills,  Sharswood's  ed.,  p.  24;  Story  on  Promissory 
Notes,  §  498  a,  ed.  1868,  p.  695.)  Doubtless  this  would  be  so  held.  But 
it  must  be  acknowledged  that  the  cited  case  of  Tate  v.  Hilbert,  which  the 
text-books  all  rely  upon  as  their  sole  direct  authority  for  the  statement, 
does  not  touch  upon  the  point,  and  furnishes  no  basis  for  considering  that 
the  rule  has  the  support  of  so  much  as  a  single  adjudicated  cause. 

4  Cutts  V.  Perkins,  12  Mass.  206;  2  Parsons  on  Notes  and  Bills,  287; 
Edwards  on  Bills,  454. 

655 


S  400  REVOCATION   OF   CHECKS. 

vantaf]:e  in  comparison  with  partnerships,  by  holding  death  a 
revocation.  A  lirm  check  is  good  though  a  member  die,  for 
the  firm  lives  ;  but  a  single  business  man  works  under  the  in- 
convenience of  having  his  paper  held  less  secure  by  the  law. 

(7)  The  only  thing  that  reason  and  common  sense  demand 
in  regard  to  checks  after  the  death  of  the  drawer  is  that  they 
should  be  presented  within  such  a  reasonable  time  thereafter 
as  not  to  embarrass  or  delay  settlement  of  the  estate  ;  and  it 
would  seem  well  that  by  statute  law  provision  should  be  made 
that  in  case  of  death  of  a  depositor  the  bank  should  retain  the 
fund  for  a  certain  time,  say  a  month,  for  the  payment  of  checks 
outstanding,  allowing  the  representative  to  withdraw  the  fund 
before  such  period  expires  only  on  bond  of  indemnity. 

Some  rule,  at  any  rate,  sustaining  the  post  mortem  rights 
of  check-holders  is  required  by  those  considerations  of  security 
and  good  faith  that  underlie  the  whole  mercantile  law. 

§  400  A.  Revocation  by  Insolvency  of  Drawer.  —  It  has  been 
carelessly  laid  down  also  in  American  text-books,  that  the 
commission  by  the  depositor  of  an  act  of  bankruptcy  revokes 
the  power  of  the  bank  thereafter  to  pay  his  checks.  Readers 
consulting  the  works  which  make  this  statement  will  observe 
that  they  cite  for  it  only  English  authorities.  In  fact,  it  is 
statutory  law  in  England,  and  as  such  is  peculiar  to  that  coun- 
try. It  is  not  law  in  the  United  States.  Indeed,  there  is  no 
possibility  of  saying  precisely  at  what  stage  of  bankruptcy, 
ill  our  country,  the  bank  ceases  to  be  justified  in  paying  the 
bankrupt's  checks.  Certainly  it  is  not  when  it  first- learns  that 
he  has  committed  an  act  of  bankruptcy.  Even  the  adjudication 
of  bankruptcy,  made  upon  the  petition  of  the  bankrupt  himself 
or  of  his  creditors,  is  an  act  so  quietly  done  in  the  clerk's  office 
that  the  bank  can  have  no  knowledge  of  it  save  by  accident. 
"Whether  it  would  be  obliged  to  take  notice  of  it,  if  it  heard 
it  by  rumor  or  report,  is  doubtful.  Such  authority  is  often 
untrustworthy.  But  the  United  States  marslial  is  directed  to 
take  possession  of  all  the  effects  of  the  bankrupt  at  an  early 
stage  in  the  proceedings.  This  is  the  first  provision  which  the 
act  affords  for  any  authoritative  notice  to  the  bankers  of  the 
cessation  of  the  right  of  the  bankrupt  depositor  to  withdraw 
G56 


INSOLVENCY   OF   DRAWER.  §  400 

his  balance.  It  is  succeeded  by  publication  in  the  papers, 
which  doubtless  must  also  be  taken  as  notice,  if  none  ])rior  has 
been  had.  But  it  certainly  seems  that  if,  in  the  interval  be- 
fore such  actual  notice  from  the  marshal  or  constructive  no- 
tice by  publication,  the  bank  had  continued  to  pay  checks  in 
good  faith,  and  in  ignorance,  or  perhaps  even  in  an  honest  dis- 
belief, of  the  pendency  of  bankruptcy  proceedings,  the  bank 
can  have  done  no  wrong,  and  cannot  be  held  to  refund  to  the 
assignees  the  sum  so  paid  away.  If  the  bank  pays  on  the 
bankrupt's  check,  when  the  law  does  not  sanction  the  payment 
as  a  discharge  pro  tanto  of  the  bank's  debt,  i\\Q  right  of  ac- 
tion to  recover  the  amount  lies  only  in  favor  of  the  assignees 
in  bankruptcy. 

The  English  bankruptcy  statutes  save  the  foregoing  question 
by  forbidding  payment  only  after  "  notice  of  an  act  of  bank- 
ruptcy." 1  And  this  notice  is  required  to  be  very  certain, 
definite,  and  trustworthy .^ 

In  England  it  has  been  laid  down  that,  in  the  event  of  a 
customer  committing  an  act  of  bankruptcy,  the  bank,  imme- 
diately upon  having  knowledge  thereof,  must  discontinue  the 
payment  of  his  checks.  If  any  check  be  paid  under  such 
circumstances  that  an  individual  debtor  could  not  discharge 
himself  by  a  payment  to  the  bankrupt,  then  the  bank  will,  like 
such  an  individual  debtor,  be  liable  to  refund  the  amount  to 
the  assignees  in  bankruptcy.^  Nor  can  the  banker  defend,  in 
such  an  action  by  the  assignees,  by  showing  that  the  person  to 
whom  the  check  was  paid  had  had  no  notice  of  the  drawer's 
bankruptcy,  and  might  lawfully  have  received  payment  from 
him.* 

»  §  400  A.    12  &  13  Vict.  c.  106,  §  133. 
2  Evans  v.  Hallam,  6  L.  R.  Q.  B.  713. 

*  Grant  on  Bankers  and  Banking,  pp.  74,  75;  Mathew  v.  Sherwell, 
2  Taunt.  439;  1  Rose,  118;  Vernon  v.  Haukey,  2  T.  R.  287. 

*  Ibid. 

VOL.  I.  42  g57 


CHAPTER  XXIX. 

STATUTE   OF   LIMITATIONS. 

§  401.      Analysis.    See  §§  301,  321. 

§  402.  A  check  being  payable  on  demand,  the  statute  does  not  run  until  a 
demand  (or  some  circumsta>nce  rendering  a  demand  useless,  §  322) 
has  given  rise  to  a  right  of  action. 

§  402  a.  New  York,  however,  holds  that  the  demand  must  be  witliin  a  reason- 
able time  (six  years  at  the  limit),  in  order  to  eave  the  statute  from 
ruuning. 

§  402.  The  Statute  of  Limitations.  —  The  Same  reasons 
which  are  used  to  prove  that  the  statute  docs  not  run  be- 
tween the  bank  and  a  depositor  apply  to  the  case  of  a  check, 
as  to  the  right  of  the  holder  to  sue  the  drawer. 

The  statute  does  not  begin  to  run  until  a  right  of  action 
accrues,  and  demand  is  a  necessary  preliminary  to  action ; 
therefore  the  statute  does  not  run  between  holder  and  drawer 
until  demand. 

And  in  the  United  States  Supreme  Court  it  is  held  that  a 
check  is  not  due  until  demand,  and  therefore  the  Statute  of 
Limitations  does  not  begin  to  run  until  that  time,  as  a  general 
rule ;  ^  but  if  the  check  is  not  drawn  against  funds,  it  is  due 
at  once,  an  action  lies  against  the  drawer  immediately,  without 
presentment,  and  therefore  the  statute  begins  to  run  at  once, 
from  the  time  the  check  is  payable.- 

(a)  And  in  this  case,  beside  announcing  this  reasonable 
principle,  the  court  held  that  a  bank  check  drawn  in  1865, 
mislaid  by  the  indorsee,  and  not  presented  till  1875,  was 
barred  by  the  six  years'  limitation,  irrespective  of  the  question 
whether  the  drawer  had  funds  or  not  in  the  bank  within  six 

1  §  402.  ]\Ierchants'  Bank  v.  State  Bank,  10  Wall.  607.  A  check  is 
not  due  till  demanded.  Cruger  v.  Armstrong,  3  Johns.  Cas.  5;  Roths- 
childs V.  Corney,  9  Barn.  &  Cr.  380;  Story  on  Notes,  §§  678,  679. 

2  Brust  V.  Barrett,  82  N.  Y.  400. 

658 


I 


STATUTE   OF   LIMITATIONS.  §  402 

years  after  date.  Tlic  court  said  that  the  holder  cannot  sus- 
pend the  statute  indefinitely  by  neglecting  to  make  present- 
ment, and  a  demand  after  six  years  will  not  be  good  unless 
the  bank  is  under  an  obligation  to  pay,  notwithstanding  an 
unexplained  delay.  The  rule  requiring  a  demand  is  for  the 
protection  of  the  depositor,  and  cannot  be  used  for  his  an- 
noyance, and  the  holder's  omitting  to  make  a  demand  that 
he  might  make  at  any  time  will  not  keep  the  statute  from 
running.^  It  is  argued  contra^  that  the  delay  in  making 
demand  benefits  the  drawer,  as  he  has  the  money  that  much 
longer.     (§  322.) 

This  would  seem  to  point  to  the  conclusion  that  demand 
must  be  made  within  reasonable  time  in  order  to  be  the  begin- 
ning of  the  statute,  otherwise  it  will  run  from  the  date  of 
delivery,  or  date  of  the  paper,  whichever  is  latest.  Or  perhaps 
the  idea  of  the  court  is,  that  if  no  demand  be  made  within  six 
years,  the  action  is  barred ;  if  a  demand  is  made  within  six 
years,  then  the  right  of  action  against  the  drawer  on  account 
of  nonpayment  would  run  six  years  from  the  demand. 

s  Brust  V.  Barrett,  16  Hun,  409. 

659 


CHAPTER   XXX. 

ACCEPTANCE   AND    CERTIFICATION. 

§  403.   Analysis. 

Object,  Nature,  Form,  Authority,  Effect,  Statute   of  Limitations, 
Mistake. 
§  404.         Acceptance  not  required,  nor  can  it  be  demanded  as  a  right. 
§414.   Objects. 

To  enable  holder  to  use  the  check  as  money,  and  so  render  it  possi- 
ble for  persons  little  acquainted  with  each  otlier  to  deal  safely  and 
readily. 
§  405.  Form. 

§  406.  Usually  the  word  "  good  "  is  written  on  the  check. 

§  400.  Any  mark  sanctioned  by  custom  has  the  same  effect  and  force. 

§§  406,  406  A.   Verbal  acceptance  is  good,  if  there  are  funds. 

If  no  funds,  it  is  a  promise  to  pay  the  debt  of  another,  and 
must  be  in  writing,  unless  a  consideration  moves  from  the 
party  to  whom  the  promise  is  made ;  or  perhaps  if  the 
liolder  does  not  know  of  the  lack  of  funds ;  and  some  go 
80  far  as  to  hold  that  the  Statute  of  Frauds  does  not  apply 
to  anj'  commercial  securities. 
§  407.  Statutes  in  some  States  require  it  to  be  in  writing. 

§  407  a.      A  promise  to  pay,  communicated  to  the  holder  as  inducement  to  take 

the  check,  is  an  acceptance  by  estoppel. 
§  408  b.      Conditional  acceptance  may  be  made,  as  when  there  are  no  funds  at 
the  time  of  presentment, 
(c)  Acceptance  to  pay  at  a  future  day. 
§  409.  Unreasonable  retention  may  perhaps  be  an  acceptance,  though  the 

weight  of  authority  is,  that  retention  alone  will  not  amount  to  an 
acceptance,  for  the  bank  is  under  no  obligation  to  send  an  answer 
to  the  holder ;  it  is  the  duty  of  the  latter  to  call  on  the  bank  to 
know  its  decision,  allowing  the  bank  twenty -four  hours  to  examine 
its  accounts. 
§  410.         Charging  the  check  to  tlie  drawer  on  the  bank-books,  or  in  a  scttle- 
§  51.3.       ment  with  liim,  or  paying  474  the  check  on  a  forged  indorsement, 
is  held  to  be  an  acceptance,  and  tlie  true  owner  can  sue  the  bank; 
but  U.  S.  S.  C.  contra,  as  to  the  effect  of  payment.     §  474  b  and/. 
Mistake  in  putting  the  check  on  the  cancelhng  fork  is  not  an  accept- 
ance. 
§  411.         Delivery  is  essential  to  complete  the  certification,  and  raise  liability 
of  the  bank. 

660 


ANALYSIS.  §  403 

§  412.   Place. 

Acceptance  away  from  bank  docs  not  bind  bank.     §  168  d. 
§413.   Authority  to  Ckktify.     §  155  J. 

Cashier,  president,  and  teller  have  inherent  power. 

Assistant  cashier  or  otlier  subordinate  has  no  inherent  power. 

The  check  must  be  regular  in  form,  and  not  post-dated,  or  the  oflBcer 

cannot  certify. 
A  national  bank  may  certify. 
Effect  of  Certification. 
§  414.  If  after  Issue  of  the  Check. 

(a,  b)    It  discharges  the  drawer,  both  on  the  clieck  and  on  the  original  debt ; 
(e,  k,  I)       it  is  payment  as  to  him  and  as  to  indorsers  brfore  certification. 
{b)  The  drawer  cannot  sue  the  bank,  though  it  refuse  to  pay  a  check 

that  has  been  certified  after  issue. 
(a)  The  bank  is  liable  as  on  a  certificate  of  deposit. 

(e)  The  holder  becomes  in  fact  a  depositor  with  the  bank  under  the 

limitation  that  his  deposit  must  be  drawn  by  the  certified  check, 

instead  of  by  checks  he  may  draw  at  will. 
(c)  Though  the  clieck  is  stolen,  a  honnjide  holder  may  sue  the  bank. 
(_;')  But  if  the  holder  took  with  notice  that  the  certification  was  not  for 

purposes  of  negotiability,  he  is  subject  to  equities. 

(f)  It  is  the  officer's  duty  to  charge  the  amount  immediately  to  the 

drawer,  and  this  transfers  the  deposit  to  the  holder. 
§  414.  But  the  bank  is  bound  to  an  innocent  holder  of  a  certified  check, 

though  it  had  no  funds,  or  they  have  been  since  withdrawn,  or 
though  the  officer  exceeded  his  authority,  or  even  if  a  national 
bank  should  certify  without  funds,  it  is  probable  no  one  but  the 
United  States  could  take  advantage  of  that  fact.  (See  Ultra  vires.) 
§  414.  {h)  The  certification  warrants  only  the  drawer's  signature  and  the  pos- 
session of  funds,  and  if  the  check  was  otherwise  a  forgery,  as  if  the 
amount  is  raised  before  or  after  certification,  the  bank  is  not  bound 
to  pay  the  excess,  and  may  recover  it  as  money  paid  by  mistake, 
80  far  as  the  error  has  not  prejudiced  an  innocent  party.  (See 
Forgery.) 

Whether  evidence  of  usage  among  banks  and  merchants  to  consider 
(/)   the  bank  bound  at  all  events,  i.  e.  warranting  the  body  of  the 
check  is  admissible.  (?) 

Louisiana  holds  that  certification  warrants  the  amount  of  a  check  at 
the  time  of  certification,  though  it  has  been  fraudulently  raised 
before  presentment  for  certification. 
§  478.  Forgery.  If  a  bank  teller  acknowledges  the  genuineness  of  a  cer- 
tification which  in  fact  is  forged,  it  is  equivalent  to  an  original 
certification,  unless  the  mistake  can  be  corrected  without  putting 
an  innocent  party  in  a  worse  position  than  if  the  teller  had  recog- 
nized the  forgery  when  the  check  was  presented  to  him. 

The  officer  has  no  authority  to  warrant  the  body  of  a  check,  and 
inquirer  has  no  right  to  rely  upon  his  representations. 

But  if  the  bank  has  knowledge,  or  easy  means  of  knowledge,  of  a 
matter  regarding  a  check,  it  must  not,  by  omitting  to  disclose  it, 

661 


§  404  ACCEPTANCE    AND    CERTIFICATION. 

ij)  cause  (lamajje  to  one  inquirinf»  with  the  evident  purpose  of  acting 
§  482 e.  on  the  reply.     It  must  not  omit  such  examination  of  its  books  as 

is  usual  in  simiiar  cases. 
(Roth  New  York  cases,  tiie  latter  a  dictum.) 
If  Certifikp  nicFOUE  Issue. 

The  drawer  is  not  discharj^ed  until  the  certification  is  verified,  i.  e. 
§  415.  until  certified  anew  ;   but  of  course  holder  must  present  in  due 

season,  as  in  the  case  of  an  ordinary  check. 
So  an  indorser,  who  has  a  check  certified  before  indorsing  it,  is  liable 

on  it,  as  an  indorser  on  a  note  is  responsible. 

The  bank  is  not  absolutely  liable  on  a  check  certified  in  the  hands 

of  the  drawer  until  it  has  notice  that  the  check  is  in  the  hands  of 

some  one  who  can  demand  payment  of  it  from  the  drawer. 

§§410,417.  The  fund  is  subject  to  attachment  by  drawer's  creditors  until  issue 

§  416.  of  the  check  ;  and  in  case  of  bank's  insolvency  before  presentment 

the  drawer  siiould  be  held  upon  due  notice. 
§  417.   As  Attachment  of  the  Drawer's  Detosit 

Will  therefore  be  good,  though  the  deposit  is  covered  by  a  certified 
check,  which  the  bank  has  reason  to  believe  is  still  owned  by  the 
drawer  at  the  time  of  service. 
§  418.   The  Statute  of  Limitations 

Runs  against  a  certified  check  only  from  the  time  of  demand  for 
payment. 
§  419.   Mistaken  Certification 

May  be  revoked  if  no  innocent  party  is  damaged  by  reliance  on  the 
bank's  action ;  i.  e.  if  .all  innocent  parties  are  in  the  same  position, 
as  if  the  bank  had  refused  to  certify  the  check  when  presented  for 
that  purpose. 

§  404.  Acceptance  of  Check  not  legally  requisite ;  nor  can 
it  be  claimed  as  a  Right.  —  The  act  by  which  the  bank  places 
itself  under  obligation  to  pay  to  the  holder  the  sum  called  for 
by  a  check  must  be  the  expressed  promise  or  undertaking  of 
the  bank  signifying  its  intent  to  assume  this  obligation,  or 
some  act  from  which  the  law  will  imperatively  imply  such 
valid  promise  or  undertaking.  The  most  ordinary  form  which 
such  an  act  assumes  is  the  acceptance  by  the  bank  of  the 
check,  or,  as  it  is  perhaps  more  often  called,  the  certifying  of 
the  check.  A  check  is  not  an  instrument  which  in  the  ordi- 
nary course  of  business  calls  for  acceptance.  The  holder  can 
never  claim  acceptance  as  his  legal  right.  He  can  present 
for  payment,  and  only  for  payment.  But,  on  the  other  hand, 
there  is  nothing  in  the  nature  of  a  check  which  intrinsically 
precludes  its  acceptance,  in  like  manner  and  with  like  effect 
662 


VERBAL   CERTIFICATION.  §  40G 

as  a  bill  of  excliangc  or  draft  may  be  accepted.  Tlio  l)ank 
may  accept,  if  it  chooses ;  and  it  is  frequently  induced  by  con- 
venience, by  the  exigencies  of  business,  or  by  the  desire  to 
oblifre  customers,  vohnitarily  to  incur  the  obligation. 

§  405.  Form.  —  By  writing  "good"  on  check,  or  otherwise 
marking.  Verbal  acceptance ;  if  no  funds,  Statute  of  Frauds 
prevents  verbal  acceptance,  though  this  is  the  subject  of  con- 
flict. Statute  law.  Communicated  promise  is  an  acceptance. 
So  charging  the  check  to  the  drawer,  or  unreasonably  detain- 
ing it  (?)  ;  but  not  putting  the  check  on  cancelling  hook  by 
mistake.  Delivery  is  essential  to  complete  certification,  and 
to  create  liability  of  the  bank  upon  it.  Conditional  acceptance. 
AcceptaTice  to  pay  at  future  day. 

§  406.  "Written  and  Verbal  Certification.  —  Ordinarily  the 
acceptance  or  certification  of  a  check  is  performed  and  evi- 
denced by  some  word  or  mark,  usually  the  word  "  good," 
written  upon  the  check  by  the  banker  or  bank  ofTicer.  But 
at  common  law  this  is  not  necessary,  and  in  the  absence  of  a 
controlling  and  exclusive  usage  in  favor  of  such  writing,  a 
verbal  acceptance  may  be  sufficient.^ 

"  Any  language,  verbal  or  written,  employed  by  an  officer 
of  a  banking  institution,  whose  duty  it  is  to  know  the  finan- 
cial standing  and  credit  of  customers  representing  that  a 
check  drawn  upon  it  is  good,  estops  the  bank  from  thereafter 
denying,  as  against  a  bona  fide  holder  of  the  check,  the  want 
of  funds  to  pay  the  same."  ^ 

A  parol  acceptance,^  or  a  promise  to  accept  a  bill  of  ex- 
change or  draft,  is  valid  under  the  law  of  Illinois,  and  may  be 
implied  as  well  as  express. 

§  406  A.  Parol  Acceptance  and  the  Statute  of  Frauds.  — 
(1)  Where  a  person  verbally  accepts  or  promises  to  accept  a 
bill  on  some  new  and  independent  consideration,  moving  from 

1  §  406.  First  National  Bank  v.  Merchants'  National  Rank,  7  W.  Va. 
544;  Pope  v.  Bank  of  Albion,  59  Barb.  226,  and  cases  cited  post  in  this 
title. 

*  Pope  V.  Bank  of  Albion,  59  Barb.  226. 

s  Sturges  r.  Fourth  National  Bank,  75  111.  595.  See  Scudder  v.  Union 
National  Bank,  91  U.  S.  406. 

663 


§  406  ACCEPTANCE    AND    CERTIFICATION. 

tlie  party  to  wliom  the  promise  is  made,  as  that  he  shall  buy 
a  certain  bill  already  drawn,  or  to  be  drawn,  which  he  actually 
docs  on  faith  of  the  promise,  the  Statute  of  Frauds  does  not 
apply.  The  promise  is  an  orii^inal  one  on  sufficient  considera- 
tion. "  If  A.  says  to  B.,  Pay  so  much  money  to  C.  and  I  will 
repay  you,  it  is  an  original  independent  promise ;  and  if  the 
money  is  paid  on  the  faith  of  it,  it  has  always  been  deemed 
an  obliji^atory  contract,  though  it  be  by  parol,  because  there  is 
an  original  consideration  moving  between  the  parties."  ^ 

(2)  When  the  acceptor  has  funds  of  the  drawer,  the  stat- 
ute cannot  apply,  for  the  promise  is  not  to  pay  the  debt  of 
another,  but  to  pay  the  promisor's  own  debt  to  the  drawer  in 
a  particular  way,  namely,  by  paying  the  drawer's  debt  to  some 
third  pcrson.2     (See  §  408  A.) 

(3)  If  there  are  no  funds  of  the  drawer  in  the  hands  of  the 
acceptor,  nor  any  consideration  for  his  promise  to  bring  the 
case  under  (1),  —  First, -when  the  payee  or  holder  does  not 
know  the  fact  that  there  are  no  funds,  the  law  of  estoppel 
clearly  applies ;  the  acceptor  admits  that  he  has  funds  by  the 
very  act  of  acceptance.  It  would  undoubtedly  be  better  if 
parol  acceptance  were  barred  out  entirely.  Negotiable  paper 
ought  to  be  protected  by  all  reasonable  means  of  attaining 
certainty  and  precision,  and  so  far  as  possible  it  should  carry 
its  character  and  condition  on  its  face.  But  as  parol  accept- 
ances are  allowed,  the  established  principles  of  law  should  be 
applied,  and  when  A.  by  such  acceptance  leads  B.  to  rely  upon 
it,  and  refrain  from  taking  such  steps  to  secure  himself  as  he 
otherwise  might,  A.  is  clearly  estopped  to  deny  the  existence 
of  funds,  a  fact  peculiarly  within  his  own  knowledge.  There 
are  cases,  however,  which  hold  a  parol  acceptance  without 
funds  void  under  the  Statute  of  Frauds,  without  inquiring 
as  to  the  knowledge  of  the  holder.^     Such  cases  look  to  the 

1  §  400  A.   Townley  v.  Sumrall,  2  Pet.  170. 

2  Putney  V.  Farnhain,  27  Wise.  187;  Shields  v.  Middleton,  2  Cranch 
C.  C.  20.");  Spadine  v.  Heed,  7  Bush,  455;  Besshears  v.  Rowe,  40  Mo.  501; 
Pike  V.  Irwin,  1  Sand.  (N.  Y.)  14;  Spalding  v.  Andrews,  48  Pa.  St.  411. 

'  Pike  V.  Irwin,  1  Sand.  14;  Manley  v.  Geagan,  105  Mass.  445;  Quia 
V.  Ilaiiford,  1  Hill,  82;  Plummer  v.  Lyman,  49  Me.  229;  Wakefield  y. 
Green  hood,  29  Cal.  000. 
664 


VERBAL    CERTTFICATTON.  §  407 

actual  facts  as  constitntinir  tlio  contract,  and  not  to  tlio  under- 
standing between  the  parties.  Second,  it  the  holder  knew  of 
the  want  of  funds,  and  the  case  does  not  come  under  (1)  or 
(2),  it  may  seem  clearly  within  the  statute  as  a  promise  to 
pay  the  debt  of  another,  and  so  understood  by  both  parties ;  * 
but  some  authorities  strongly  defend  the  view  that  commercial 
engagements,  regulated  by  the  law  merchant,  are  beyond  the 
Statute  of  Frauds  altogether.^ 

§  407.  The  law  in  England  used  to  allow  parol  accept- 
ance ;  but  the  statutes  1  &  2  Geo.  IV.  c.  78,  §  2,  and  19  & 
20  Vict.  c.  97,  §  7,  require  an  acceptance  in  writing.  Some 
of  the  States  of  the  Union  have  enacted  laws  to  a  similar 
effect. 

In  New  York  a  statute  requires  acceptance  of  a  bill  of  ex- 
change to  be  made  in  writing,  and  the  courts  liave  held  that  a 
check  is  so  far  like  a  bill  of  exchange  as  to  fall  within  this 
statute,  and  that  the  verbal  promise  of  the  bank  to  pay  it  is 
of  no  effect.^  In  Illinois  the  Statute  of  Frauds  does  not  hinder 
the  parol  acceptance  of  an  existing  check. ^ 

(a)    A  promise  to  pay,  if  communicated  to  the  holder  and 
acted  on  by  him  as  an  inducement  in  taking  the  promise  com- 
check,  is  an  acceptance.^     If  not  communicated,  it  "^"'"'^''ted. 
would  be  no  acceptance.^ 

{h~)  In  Morrell  v.  Wootten  ^  it  is  laid  down  that,  when  a  de- 
positor directs  his  banker  to  make  a  payment  to  a  third  party, 
if  the  banker  consents  to  do  so  and  the  direction  is  made 
known  to  the  third  party,  then  the  bankers  assent  inures  to 
his  benefit.  The  privity  is  complete,  and  the  third  party  may 
compel  payment  by  his  own  suit  brought  directly  against  the 
banker.     But  the  communication  to  the  payee  is  absolutely 

*■  Carville  v.  Crane,  5  Hill,  583;  Taylor  v.  Drake,  4  Strobh.  (S.  C.)  431. 

6  Butler  V.  Prentiss,  6  Mass.  430;  Chitty  on  Bills,  p.  4;  Spalding  u. 
Andrews,  48  Pa.  St.  411;  Throop  on  Verbal  Agreements,  p.  159;  Pillans 
V.  Van  Mierop,  3  Burr.  1G74. 

1  §  407.    Risley  v.  Phrenix  Bank,  83  N.  Y.  318. 

2  Nelson  v.  First  National  Bank,  48  111.  36.  See  Carr  v.  National 
Security  Bank,  107  Mass.  48. 

8  Bank  v.  Pettel,  41  111.  492. 
<  10  Beav.  197. 

665 


§  408  ACCEPTANCE   AND    CERTIFICATION. 

essential.  The  reason  that  such  stress  is  laid  upon  this  point 
is  to  be  discovered  in  the  fact  that  the  order  for  payment  is 
to  be  met  from  a  general  fund.  Where  the  order  is  for  the 
payment  of  a  particular  fund,  the  consent  of  the  beneficiary 
is  needless ;  for  this  latter  transaction  constitutes  properly 
an  assignment,^  and  since  it  is  for  his  benefit  his  assent  is 
supposed. 

§  408.  It  is  an  inference  from  the  indirect  intimations  and 
language  of  many  of  the  causes  which  form  the  authorities  on 
this  point,  that  this  is  one  of  the  matters  in  which  the  analogy 
of  bills  of  exchange  would  be  regarded  as  directly  in  point, 
and  probably  as  conclusive.^  It  is  a  senible  in  the  case  of 
Barnet  v.  Smith,  cited  below,  that  the  cashier's  simple  state- 
ment that  a  check  is  "  good  "  is  an  acceptance  or  certification 
equally  with  the  writing  of  the  word  itself. 

Since  the  foregoing  was  written,  this  subject  has  been  dis- 
cussed by  the  Supreme  Court  of  the  United  States,^  who  seem 
very  reluctantly  to  concede  that  the  rule  has  been  established 
to  the  effect  that  a  verbal  certification  is  legally  sufficient. 
They  say,  "  The  authorities  relied  on  are  mainly  acceptances 
of  drafts  or  bills  of  exchange.  .  .  .  The  highest  courts  in  this 
country  and  in  England  have  regretted  the  decisions  which 
gave  original  sanction  to  this  proposition";^  i.  e.  that  a  draft 
or  bill  might  be  verbally  accepted.  The  distinction  is  pointed 
out,  that  the  written  certification  is  an  undertaking  to  all  the 
world  of  such  character  and  effect  that  the  check  so  certified 
can  circulate  as  money ;  whereas,  the  verbal  representation  is 
made  only  for  the  guidance  of  the  payee  or  holder  making  the 
inquiry.* 

^  To  this  point  are  cited  Row  v.  Dawson,  1  Ves.  Sen.  331 ;  Ex  parte 
South,  3  Swanst.  392. 

1  §  408.  Baniet  v.  Smith,  10  Foster,  (N.  H.)  256;  Lemmon  v.  Box, 
20  Tex.  320  (bill  of  exchange);  Wheatley  r.  Strobe,  12  Cal.  92;  Fruh- 
ling  V.  Schroeder,  2  Bing.  New  R.  77;  Lumley  ?'.  Palmer,  Strange,  1000; 
Ilardwicke,  7-1;  Robson  v.  Bennett,  2  Taunt.  388;  Grant  on  Bankers  and 
Banking,  p.  57;  Lilly  v.  Hays,  5  Ad.  &  El.  518. 

2  Espy  V.  Bank  of  Cincinnati,  18  Wall.  004. 
8  Boyce  V.  Edwards,  4  Pet.  Ill,  at  p.  122. 

*  Espy  r.  Bank  of  Cincinnati,  18  Wall.  604. 
666 


VKRIJAL    ACCKI'TANCE.  §  408 

(a)  In  the  United  States  Circuit  Court  for  the  First  Cir- 
cuit, Judge  Sheplcy  has  gone  much  farther  still.  The  check  of 
one  Bcal  was  presented  by  the  payees  to  the  bank  on  which  it 
was  drawn,  and  payment  requested.  The  cashier  replied  that 
if  the  check  should  be  presented  through  the  clearing-house 
in  due  course  it  should  be  paid.  The  payees  accordingly 
deposited  it  in  their  bank  ;  but  when  it  came  through  the 
clear! jig-house  to  the  drawee  bank  on  the  following  morning, 
it  was  dishonored.  At  the  time  when  the  cashier  made  this 
statement  or  promise  to  the  payees,  the  drawer  had  no  funds 
in  the  bank ;  but  the  cashier  did  not  state  this  fact,  nor  had 
the  payees  any  knowledge  of  it,  unless  they  were  bound  to 
take  notice  of  it  or  to  infer  it  from  the  fact  that  the  cashier 
refused  or  was  unwilling  to  have  the  check  paid  over  the 
counter.  Apparently  the  judge  was  of  opinion  that  this  re- 
fusal or  unwillingness  was  notice  of  the  lack  of  Verbal  ac- 
funds.  The  pleadings  were  in  such  shape  that  the  good'^n^case 
question  of  the  cashier's  authority  could  not  be  fun^^g*%"° 
raised.  The  plaintiff  averred  the  promise  of  the  l-iosA. 
hank,  and  the  demurrer  admitted  it.  The  court,  neverthe- 
less, held  that  no  obligation  was  fastened  upon  the  bank. 
The  debt  was  still  the  debt  of  Beal,  and  the  promise  of  the 
bank  was  the  promise  to  pay  the  debt  of  another,  and  there- 
fore void  under  the  Statute  of  Frauds,  since  it  was  not  in 
writing.  At  any  time  until  the  checks  were  in  fact  paid, 
the  payees  could  ignore  them,  and  enforce  the  original  debt 
against  Beal,  which  was  not  extinguished  by  the  check  till 
the  check  itself  was  paid.  The  payees  therefore  parted  with 
no  right,  and  were  put  in  no  worse  position,  by  reason  of  the 
promise. 

On  the  other  hand,  no  consideration  passed  to  the  bank. 
There  being  no  funds,  it  could  not  be  compelled  to  pay  at  the 
time,  and  the  postponement  of  presentment  was  no  considera- 
tion ;  had  the  bank  had  funds  and  been  bound  to  pay  at  the 
time  of  the  first  presentment,  it  might  have  been  different, 
for  then  the  engagement  would  have  been  substantially  to 
pay  the  drawee's  own  debt  to  the  drawer.  "  It  cannot  be 
perceived  how  any  sound  reason  can  be  given  why  a  verbal 

GG7 


§  408  ACCEPTAN-CE   AND    CERTIFICATION. 

acceptance  or  promise  to  accept, /or  the  mere  accommodation 
of  the  drawer,  without  funds  or  value  received,  should  not  be 
treated  as  within  the  statute."  The  regret  expressed  by  the 
Supreme  Court  that  verbal  acceptances  have  ever  been  held 
sutticient  is  reiterated  ;  and  the  court  says  that  "  the  reasons 
given  for  holding  good  a  parol  accommodation  acceptance  of 
a  bill  of  exchange  do  not  apply  to  the  case  of  a  bank  check. 
The  distinijuishing  characteristics  of  checks,  as  contradistin- 
guished from  bills  of  exchange,  are  that  they  are  always  drawn 
jpon  a  bank  or  banker,  that  they  are  payable  immediately 
ipon  presentment  without  the  allowance  of  any  days  of  grace, 
md  that  they  are  never  presentable  for  acceptance,  but  only 
for  payment.  The  promise  declared  on  does  not  amount  to 
an  acceptance.  If  it  be  treated  either  as  a  promise  to  accept 
or  a  promise  to  pay,  it  cannot  avail  the  plaintiffs.  No  con- 
sideration to  support  the  promise  appears.  The  checks  were 
not  taken  on  the  faith  of  such  promise.  The  holder  gave 
nothing  and  relinquished  no  advantage  for  the  promise."  It 
was  carefully  noted  that  the  plaintiffs  were  not  persons  who 
had  taken  the  checks  bona  fide  for  value,  upon  the  strength 
of  the  promise  of  the  bank.  Much  of  the  reasoning  in  this 
opinion  is  far  from  being  conclusive  or  unanswerable.  In 
this  case  the  holder  did  not  know  there  were  no  funds,  and  it 
seems  just  that  the  principle  of  estoppel  should  be  applied  to 
hold  the  bank.     (See  §  406  A.) 

{h}  The  promise  of  the  banker  must  be  absolute.  If  it  be 
contingent,  or  if  it  be  other  than  a  distinct  promise  of  out- 
Conditional  right  and  unconditional  payment,  it  does  not  bind 
acceptance.  ]^jj^  ^g  ^^^  acceptancc.  Thus,  a  depositor  ordered 
his  banker  to  hold  a  certain  sum  at  the  disposal  of  A.,  and 
notified  A.  of  his  action.  The  banker  likewise  notified  A.  of 
the  direction  he  had  received,  and  that  he  had  registered  it. 
lie  declined,  however,  for  the  present,  to  accept  bills  for  any 
part  of  tiie  amount,  since  he  was  already  in  advance  to  his 
customer ;  and  positively  undertook  and  promised  only  that, 
if  remittances  should  come  forward  so  that  he  should  be 
enabled  to  c()in))ly  with  the  directions,  then  he  would  promptly 
advise  A.  The  court  held  that  no  contract  arose  with  A., 
GG8 


LIMITED    ACCEPTANCE.  §  409 

and  that  lie  liad  no  remedy  cither  in  law  or  in  equity  against 
the  banker.^ 

An  interesting  case  of  conditional  acceptance  arose  in  West 
Virginia.  The  U.  S.  Rev.  Sts.  §  5208,  declare  it  to  be  unlaw- 
ful for  a  national  bank  to  certify  a  check,  unless  the  drawer 
has,  at  the  time  of  presentment  for  certification,  sufficient 
funds  in  the  bank  to  meet  the  check.  A  check  was  presented, 
and  the  cashier  promised  the  holder  that  it  should  be  paid  in 
case  a  draft  deposited  for  collection  by  the  drawer  of  the 
check  should  be  duly  paid.  The  draft  was  duly  paid.  The 
court  held  that  thereupon  the  obligation  of  the  bank  to  pay 
the  check  was  complete  and  binding.  A  statute  prohibiting 
certification  of  checks  when  the  drawer's  funds  are  insufficient 
docs  not  invalidate  a  promise  on  the  part  of  the  bank  to  pay 
a  check  at  a  future  day,  when  the  drawer  shall  have  enough 
funds  for  that  purpose  in  its  possession.  In  other  words,  this 
was  not  a  certification  absolute,  which  would  have  been  bad 
for  lack  of  funds,  but  a  certification  contingent,  which  could 
not  come  into  force  until  the  funds  should  be  received  and 
the  law  satisfied.^ 

(c)  If  the  bank  only  accepts  or  certifies  generally,  its  obli- 
gation is  to  pay  at  any  time  when  the  holder  may  make  de- 
mand. But  if  the  acceptance  is  to  pay  at  a  future  Acceptance 
day  certain,  then  the  transaction,  as  between  the  future  day. 
bank  and  the  drawer,  is  equivalent  to  a  loan  of  the  amount 
made  by  the  drawer  to  the  bank  for  the  period  intervening 
between  the  acceptance  and  the  date  named  for  payment. 
During  that  interval  the  bank  has  a  right  to  retain  from  the 
funds  of  the  drawer  in  its  hands  a  sum  sufficient  to  meet  the 
acceptance  when  it  shall  fall  duc.'^ 

§  409.  Retention.  —  It  occasionally  happens  that  a  check 
is  presented  to  the  bank,  and  is  not  paid  upon  the  spot  by  the 
bank,  but  is  retained  by  it.  If  this  happens  without  any  dis- 
tinct contemporaneous  agreement  between  the  holder  and  the 
bank  as  to  the  conditions  and  purpose  of  the  retention,  it  will 

6  Malcolm  r.  Scott.  5  Exch.  601 ;  3  Mac.  &  G.  2!). 

*  First  National  Hank  v.  Merchants'  National  Bauk,  7  W.  Va.  5i4. 

'  Bank  o£  England  v.  Anderson,  4  Scott,  50. 

669 


§  409  ACCEPTANCE    AND    CERTIFICATION. 

not  operate  as  an  acceptance  of  the  check  by  the  bank^  unless 
the  retention  is  continued  for  an  unreasonable  length  of  time 
without  explanation  on  the  part  of  the  bank.  If  the  check  is 
sent  to  the  bank  through  the  mail,  it  has  even  been  said  that 
the  bank  may  hold  it  any  length  of  time  without  incuri'ing  the 
liability  of  an  acceptance.  For  the  mere  fact  that  a  check  is 
lianded  into  a  bank  creates  of  itself  no  obligation  on  the  part 
of  the  bank  to  notify  the  holder  that  it  will  not  be  paid.  It 
is  his  duty  to  call,  after  a  reasonable  period  has  elapsed,  and 
demand  payment,  or  ask  whether  or  not  it  will  be  paid ;  and 
after  the  lapse  of  such  time  it  will  be  the  duty  of  the  bank  to 
pay  or  to  answer  him ;  but  not  before  that  time,  for  the  bank 
always  has  a  reasonable  period  for  examining  its  accounts 
before  it  can  be  required  to  pay,  or  to  answer  whether  or  not 
it  will  pay.  In  the  case  of  Bellasis  v.  Hester  ^  such  period 
was  said  to  be  twenty-four  hours.  In  the  case  of  Overman 
V.  Hoboken  City  Bank ,2  a  check  drawn  to  the  order  of  the 
plaintiff  was  deposited  in  the  Bank  of  Commerce,  in  New 
York  city,  and  was  by  that  bank  transmitted  to  the  Ocean 
Bank  for  the  purpose  of  being  sent  thence  to  the  defendant 
bank  for  payment.  It  was  received,  by  this  means,  by  the 
defendant  bank,  October  31,  between  twelve  and  one  o'clock, 
noon,  and  by  it  was  retained  till  twelve  M.  on  the  following 
day,  when  it  was  returned  to  the  Ocean  Bank  marked  "  not 
good."  At  ten  o'clock  a.  m.  on  the  day  following  the  Ocean 
Bank  sent  it  back  to  the  Bank  of  Commerce,  which  immedi- 
ately notified  the  plaintiffs  of  the  dishonor.  The  court  held 
that  the  mere  retention  of  the  check  by  the  defendants  did 
not  constitute  an  acceptance  by  them,  or  bind  them  to  a  pay- 
ment. The  court  said,  a  banker  may  retain  a  check  twenty- 
four  hours  to  examine  his  accounts  and  see  if  he  will  accept ; 
"  after  the  lapse  of  this  time  the  holder  has  a  right  to  know 
if  the  check  or  bill  is  to  be  honored  or  dishonored,  but  it  is 
his  duty  to  wait  upon  the  drawee  to  ascertain  this."  ^     In  the 

1  §  409.    1  Ld.  Raym.  280.  2  o  Vroom,  5G3. 

'  Overaian  v.  Hoboken  City  Bank,  2  Vroom,  5G3.  Twenty-four  hours 
is  deemed  a  reasonable  period  for  the  drawee  of  a  bill  to  deliberate 
and  look  to  the  state  of  his  accounts.  Connelly  v.  McKean,  61  Pa,  St. 
670 


RETENTION.  §  409 

absence  of  usage  or  mode  of  dcalinf^,  or  circumstance  of  con- 
duct aniountin<^  to  estoppel,  the  best  opinion  is  that  mere 
retention  will  not  operate  as  an  acceptance,  whatever  be  tlie 
length  of  time,  for  the  drawee  is  not  obliged  to  send  an  an- 
swer even  when  the  holder  sends  the  check  to  it  by  mail,  but 
may  safely  wait  in  silence  till  the  holder  makes  some  further 
move.^  In  the  case  of  a  check  sent  by  mail,  however,  it  might 
seem  more  just  and  reasonable  to  hold  that  the  bank  is  the 
agent  of  the  holder  to  return  an  answer  in  reasonable  time ; 
but  we  must  remember  that  the  bank's  duty  in  regard  to 
checks  is  only  to  pay  them  over  its  counter,  and  it  cannot  be 
burdened  with  correspondence  in  addition  to  this  duty,  unless 
by  its  consent. 

The  New  Jersey  case  above  is  cited  in  Judge  Story's  work 
on  Promissory  Notes,  as  settling  the  law  upon  this  point.  But 
it  should  be  noted  that  the  above  doctrine  is  only  that  of  the 
common  law,  unaffected  by  the  introduction  of  evidence  re- 
lating to  the  understanding  and  usage  of  business  in  any 
special  locality.  In  the  case  of  Overman  v.  Hoboken  City 
Bank,  the  banks  were  situated  in  different  States,  and  cus- 
tom could  probably  not  have  been  shown.  Had  all  the  banks 
been  in  New  York  City,  such  evidence  would  probably  have 
been  offered.  The  matter  is  one  concerning  which  there  is 
usually  a  definite  and  well  understood  usage  in  every  business 
community. 

In  Pennsylvania  it  has  been  said  :  "  If  a  bank  does  not  pay 
or  accept,  it  is  bound  to  refuse.  It  has  no  right  to  receive 
and  keep  the  check  indefinitely,  thereby  leaving  the  holder  to 
suppose  that  it  has  accepted  the  check  and  assumed  its 
payment.'^ 

In  England  it  is  held  that  a  banker  may  retain  a  check 

113;  Montgomery  County  Bank  v.  Albany  City  Bank,  8  Barb.  399;  Bel- 
lasis  V.  Hester,  1  Ld.  Raym.  280;  Case  v.  Burt,  15  Mich.  82. 

*  In  Jeune  v.  Ward,  2  Stark.  326,  Lord  Ellenborougli  held  it  to  be  the 
duty  of  the  drawee  to  return  the  bill,  but  the  Court  of  King's  Bench 
reversed  his  ruling,  though  the  bill  had  been  retained  a  month.  Parsons 
agrees  with  the  text.     2  Pars.  B.  &  N.  284,  and  Chitty  on  Bills,  175. 

6  First  National  Bunk  of  Northumberland  v.  McMichael,  106  Pa. 
St.  46i. 

671 


§  412  ACCEPTANCE    AND    CERTIFICATION. 

until  next  day  to  see  if  he  is  in  funds.  lie  is  entitled  to  one 
day's  time,  and  such  delay  does  not  make  him  liable  as  for 
acceptance.'^  If  funds  come  in  while  holding  the  check,  they 
must  1)C  applied  to  it. 

§  410.  Putting  on  Cancelling  Fork.  —  Charging  Drawer.  — 
Placing  a  check  on  the  cancelling  fork  by  mistake  does  not 
amount  to  acceptance,  nor  prevent  return  of  it  on  discovering 
that  it  is  not  correct  in  form,  or  that  there  are  not  sufficient 
fuuds.^  But  deducting  the  amount  of  a  check  from  the 
drawer's  account  is  an  acceptance.^  So  if  the  amount  of  an 
outstanding  check  is  retained  by  the  drawee  bank  in  a  settle- 
ment with  the  drawer,  it  is  an  implied  acceptance.^  But  if 
the  payment  or  settlement  is  by  mistake,  as  in  case  of  pay- 
ment on  a  forged  indorsement,  the  United  States  Supreme 
Court  denies  that  there  is  any  acceptance.     (§  474  e,  h.} 

§  411.  Delivery  necessary  to  complete  Certification.  —  The 
bank's  liability  upon  a  certification  does  not  arise  upon  the 
mere  marking  the  check  "  good,"  but  upon  the  delivery  of 
the  certified  check  to  the  holder,  or  person  who  presents  it. 
If  it  receives  orders  from  the  drawer  revoking  the  check,  after 
it  is  marked  but  before  it  is  delivered,  it  delivers  the  check  at 
its  own  risk  ;  if,  however,  it  had  delivered  before  receiving  the 
order,  it  would  have  been  unnecessary  to  pay  any  attention  to 
said  order,  as  it  would  be  of  no  effect.^  A  bank  cannot  refuse 
to  pay  a  certified  check  because  of  a  countermand  after  the 
certification  is  complete.^ 

§  412.  Acceptance  away  from  the  Bank.  (^§  1G8  (?.) — An 
acceptance  by  the  cashier  away  from  the  bank  is  not  valid,  and 
will  not  bind  the  bank  nor  exclude  creditors  from  holding  the 

'  Kilsby  V.  Williams,  5  Barn.  &  Aid.  81.");  Boyd  v.  Emerson,  2  Ad.  & 
E.  184. 

*  §  410.  National  Bank  of  Rockville  v.  Second  National  Bank  of  La- 
fayette, 69  Ind.  479  (1880). 

2  Seventh  National  Bank  v.  Cook,  73  Pa.  St.  483;  Pratt  v.  Foote, 
9  N.  Y.  4G6. 

8  Savior  r.  Bushong,  100  Pa.  St.  23. 

^  §  411.  Freund  v.  Importers  &  Traders'  National  Bank,  3  Hun,  689; 
76  N.  Y.  352;  12  Hun,  537. 

"  Nassau  Bank  v.  Broadway  Bank,  54  Barb.  236. 
672 


WHO    MAY   CERTIFY.  §  413 

deposit  against  which  tlie  check  was  drawn  under  an  attach- 
ment served  after  the  outside  acceptance  was  made.^ 

§  413.  Authority  to  Certify.  —  Cashier,  president,  and  teller 
have  inherent  power,  assistant  cashier  or  any  sub-officer  not. 
Check  must  not  be  irregular  or  post-dated;  but  bank  may  be 
liable  to  iiuiocent  holder  though  the  officer  exceeded  his 
power.  National  bank  may  certify  if  funds  are  sufficient,  or 
accept  conditionally  if  funds  arc  not  suflicient. 

The  authority  of  a  subordinate  officer  to  certify  must  be 
shown  by  a  course  of  dealing  or  actual  authorization. ^  The 
cashier  has  inherent  authority  to  certify .^  President  also  has 
power  ex  officio  to  certify;  but  even  though  empowered  to 
certify  by  a  by-law,  he  cannot  certify  Ids  otvn  checks^  for  an 
agent's  power  is  to  be  used  for  the  exclusive  benefit  of  his 
principal."  The  teller  has  been  held*  to  have  authority  in- 
herent to  certify,  and  it  seems  an  unavoidable  conclusion,  as 
he  is  simply  the  substitute  of  the  cashier  in  regard  to  certain 
duties  within  the  scope  of  which  this  seems  naturally  to  fall, 
it  being  his  duty  to  pay,  and  certification  being  to  all  intents 
and  purposes  payment  of  the  check.  But  an  assistant  cashier 
has  no  inherent  power  to  certify,  and  a  holder  is  put  to  his 
inquiry  concerning  his  authority.^ 

(a)  But  the  instrument  certified  must  be  a  check  in  the 
usual  commercial  form.  Where  a  check  stated  on  its  face 
that  it  was  intended  to  be  held  as  collateral  seen-   Ch9ck  must 

be  in  proper 

rity,  the  cashier's  certification,  "  Good  when  prop-  form. 
erly  indorsed,"  was  held  to  be  irregular,  and  not  binding.^ 

1  §  412.    BuUard  v.  Randal,  1  Gray,  605. 

1  §  413.    Pope  V.  Bank  of  Albion,  .57  N.  Y.  126;  Rev.  59  Barb.  226. 

2  Merchants'  Bank  v.  State  Bank,  10  Wall.  648.  "The  power  is  in- 
herent in  the  office."  Pope  v.  Bank  of  Albion,  59  Barb.  226.  Massa- 
chusetts alone  has  cases  contra,  and  holds  that  a  usage  for  cashier  to 
certify  is  bad,  and  will  not  avail.  Mussey  v.  Eagle  Bank,  9  Met.  313; 
Atlantic  Bank  v.  Merchants'  Bank,  10  Gray,  532.  See  Chapter  XL, 
"The  Cashier." 

8  Claflin  V.  Farmers  &  Mechanics'  Bank,  25  N.  Y.  296. 
<  Irving  Bank  v.  Wetherald,  36  N.  Y.  335;    Fanners   &  Mechanics' 
Bank  v.  Butchers  &  Drovers'  Bank,  16  N.  Y.  133. 
6  Pope  V.  Bank  of  Albion,  57  N.  Y.  127. 
8  Dorsey  v.  Abrams,  85  Pa.  St.  299. 

VOL.  I.  43  673 


§  414  ACCEPTANCE    AND    CERTIFICATION. 

(i)  Wlien  a  post-dated  check  is  certified  before  maturity,  it 
carries  notice  to  all  that  the  certification  was  beyond  the 
And  not  officer's  authority."  Where  a  check  drawn  on  the 
dated  subse-    p     |    ^f  Albion  at  L.,  dated  March  1,  was  cashed 

qiient  to  cer-  ' 

tificate.  |jy  Pope  in  New  York  on  March  2,  the  fact  that  the 

check  could  not  liave  been  certified  after  date  and  then  have 
reached  New  York  by  the  time  Pope  took  it,  was  held  to  put 
Pope  on  inquiry,  and  prevent  his  recovery  as  a  bona  fide  holder.^ 

A  bank  is  not  relieved  from  paying  an  innocent  holder  by 
the  fact  that  the  cashier  transgressed  his  instructions  to  certify 
only  in  case  of  sufficient  funds.  The  authority  of  the  assist- 
ant teller  to  certify  may  be  shown  by  a  course  of  dealing 
between  hiui  and  the  bank  and  its  customers.^ 

(e)  In  Merchauts'  Bank  v.  State  Bank  the  court  declares 
that  a  certified  check  is  not  within  the  prohibition  of  the 
National  National  Currency  Act  of  1864,  §  23,  forbidding 
certify?*^  bnuks  to  issuc  post  notes  or  "other  notes"  to  cir- 
culate as  money,  other  than  ordinary  bank  bills.  The  act 
of  March  3, 1869  docs  not  prevent  national  banks  from  cer- 
tifying orally  if  funds  are  sufficient,  nor  from  accepting  con- 
ditionally to  pay  when  the  funds  are  sufficient.^*^  That  statute 
prohibits  national  banks  from  certifying  when  the  funds  are 
insufficient. 

§  414.  ESect  of  Certification  after  Issue.  —  After  the  certifi- 
cation is  complete,  the  bank  is  bound  as  a  direct  and  original 
promisor  to  the  payee  ;  it  and  he  are  parties  to  a  contract 
upon  which  he  has  his  right  of  action  directly  against  the 
bank,  without  any  regard  whatsoever  to  its  relations  with 
the  depositor  or  the  state  of  the  drawer's  account,  either  at 
the  time  of,  or  at  any  time  after,  the  acceptance.^ 

"  Clarke  National  Rank  v.  Bank  of  Albion,  52  Barb.  592. 

8  Pope  V.  Bank  of  Albion,  .57  N.  Y.  12G;  Rev.  59  Barb.  226. 

9  Hill  V.  National  Trust  Co.,  108  Pa.  St.  1. 

10  First  National  Rank  v.  Merchants'  National  Bank,  7  W.  Va.  544. 

1  §  4U.  Keene  v.  Beard,  8  C.  B.  n.  s.  372;  Ballard  v.  Randall,  1  Gray, 
605;  Morse  v.  Massachusetts  National  Bank,  1  Holmes,  C.  C.  209;  Cooke 
V.  State  National  Bank  of  Boston,  52  N.  Y.  96,  affirming  same  case,  50 
Barb.  339 ;  1  Lans.  494.  And  all  the  cases  cited  on  this  general  topic, 
below. 

674 


EFFECT   OF    CERTIFICATION.  §  414 

The   practice  of  certifying  checks  has  not  escaped  severe 
criticism ;    but  it  has  been  so  thoroughly  established,  both 
among  business  men  and  by  the  courts,  that  its  legality  can 
no  longer  be  questioned.     The  Supreme  Court  6i  the  United 
States,  per  Swayne,  J.,  speak  of  the  custom  in  the  following 
decisive  language :    "  All  the  authorities,  both  English  and 
American,  hold  that  a  check  may  be  accepted,  though  accept- 
ance is  not  usual.     By  the  law  merchant  of  this  country,  the 
certificate  of  the  bank  that  a  check  is  good  is  equivalent  to 
acceptance.     It  implies  that  the  check  is  drawn  upon  suHi- 
cient  funds  in  the  hands  of  the  drawee,  that  they  have  been 
set  apart  for  its  satisfaction,  and  that  they  shall  be  so  applied 
whenever  the  check  is  presented  for  payment.     It  is  an  under- 
taking that  the  check  is  good  then,  and  shall  continue  good, 
and  this  agreement  is   as  hindlng  on  the  ba7ik  as  its  notes  of 
circulation,  a  certificate  of  deposit  payable  to  the  order  of  the 
depositor,  or  any  other  obligation  it  can  assume.     The  object 
of  certifying  a  check,  as  regards  both  parties,  is  to 
enable  the  holder  to  use  it  as  money.     The  trans-       ^^*^*^" 
feree  takes  it  with  the  same  readiness  and  sense  of  security 
that  he  would  take  the  notes  of  the  bank.     It  is  available  also 
to  him  for  all  the  purposes  of  money.     Thus  it  continues 
to   perform    its    important   functions  until  in  the  course  of 
business  it  goes   back   to  the  bank  for  redemption,  and  is 
extinguished  by  payment.     It  cannot  be  doubted  that  the  cer- 
tifying bank  intended  these  consequences,  and  it  is  liable  ac- 
cordingly.    To  hold  otherwise  would  render  these  important 
securities  only  a  snare  and  a  delusion.     A  bank  incurs  no 
greater  risk  in  certifying  a  check  than  in  giving  a  certificate 
of  deposit.     In  well-regulated  banks  the  practice  is  at  once  to 
charge  the  check  to  the  account  of  the  drawer,  to  credit  it 
in  a  certified  check  account,  and,  when  the  check  is  paid,  to 
debit  that  account  with  the  amount.     Nothing  can  be  simpler 
or  safer  than  this  process. 

"The  practice  of  certifying  checks  has  grown  out  of  the 
business  needs  of  the  country.  They  enable  the  holder  to 
keep  or  convey  the  amount  specified  with  safety.  They  ena- 
ble persons  not  well  acquainted  to  deal  promptly  with  each 

G75 


§  414  ACCEPTANCE   AND    CERTIFICATION. 

other,  and  they  iivoid  the  dehiy  and  risks  of  receiving,  count- 
ing, and  passing  from  hand  to  hand  large  sums  of  money.  It 
is  computed  by  a  competent  authority,  that  the  average  daily 
amount  of  such  checks  in  use  in  the  city  of  New  York, 
throughout  tlic  year,  is  not  less  than  one  hundred  millions 
of  dollars.  We  could  hardly  inflict  a  severer  blow  upon  the 
commerce  and  business  of  the  country  than  by  throwing  a 
doubt  upon  their  validity."  ^ 

(a)  It  has  been  said  that  the  effect  of  a  legal  acceptance 
by  the  bank  is  to  place  the  holder  of  the  check  in  the  position 
Bank  owes  of  a  dopositor ;  that  in  fact  and  in  law  he  himself 
ti.e  holder,  bccomcs  thereby  a  depositor  of  the  bank.  It  was 
not  of  course  intended  by  this  remark  to  signify  that  he  stands 
precisely  on  the  footing  of  one  who  has  opened  an  ordinary 
dei)osit  account  with  the  bank.  For  example,  he  cannot  draw 
checks  against  the  amount  standing  to  his  credit.  But,  like 
an  ordinary  depositor,  he  is  a  simple  contract  creditor  of  the 
bank,  which  is  bound  to  pay  on  demand  to  him  or  to  his  order 
the  amount  of  the  debt.^  However  certain  it  may  be  consid- 
ered that  in  his  character  simply  as  a  check-holder  he  has  no 
right  to  sue  the  bank  for  the  amount  of  his  check,  at  least 
there  is  no  doubt  of  his  right  of  action  after  acceptance.  The 
acceptance  is  in  itself  a  new  and  perfect  contract  between 
himself  and  the  bank,  superseding  the  previous  peculiar  rights 
of  all  parties.  It  has  been  said  that  its  technical  operation  is 
to  transfer  to  the  holder  the  drawer's  right  of  action  against 
the  bank.*  It  is  an  inference  from  the  language  used  in  this 
case,  that  the  transaction  effects  a  literal  transferring,  in  the 
sense  of  depriving  the  former  possessor  of  his  rights ;  that  is 
to  say  that  the  right  of  action  given  to  the  holder  is  not  co- 

2  Merchants'  Bank  v.  State  Bank,  10  Wall.  G04,  at  p.  647.  See  Hel- 
■we.fje  !'.  Ilihernia  National  Bank,  28  La.  An.  520.  See  also  statement  of 
Marine  National  Bank  v.  City  National  Bank,  59  N.  Y.  71;  §  478,  Forgery 
of  Certified  Check. 

8  Girard  Bank  v.  Bank  of  Penn  Township,  39  Pa.  St.  92;  Seventh 
National  Bank  v.  Cook,  73  id.  483. 

*  Conmercial  Bank  of  Albany  v.  Hughes,  17  Wend.  94.     The  same  is 
implied  also  in  the  decision  rendered  in  Dykers  v.  Leather  Manufacturers* 
Bank,  11  Paige,  612. 
676 


EFFECT   OF   CERTIFICATION.  §  414 

existent  with  another  right  of  action  still  remaining  in  the 
drawer,  but  is  identical  with  it,  and  is  by  the  act  of  tlie  bank 
passed  over  from  the  one  to  the  other. 

(^))  The  drawer  can  no  longer  sue,  though  the  bank  should 
finally  refuse  to  pay  the  check.  For  he  has  originally  only  a 
right  to  demand  that  the  check  shall  be  dulv  paid    Drawer 

11.  •         T        !>  1        1  "^  cannot  sue 

on  presentment,  and  his  action  lies  tor  the  damage  bank, 
resulting  to  him  or  to  his  credit  from  not  liaving  his  debt 
duly  discharged  in  the  manner  he  has  led  his  creditor  to  sup- 
pose would  be  sufficient.^  But  if  the  holder  waives  his  fight 
to  immediate  payment,  by  expressly  asking  for  or  even  by 
accepting  the  offer  of  a  certification  by  the  bank,  it  follows 
that  since  his  act  acquits  the  debt  due  him  from  the  drawer, 
the  drawer  can  thereafter  have  no  cause  or  basis  whatsoever 
on  which  to  sue.  The  matter  is  voluntarily  taken  out  of  his 
hands  by  the  other  parties,  who  make  their  arrangements  to 
suit  their  own  convenience.  Even  if  the  drawer  has  suggested 
or  requested  the  arrangement,  the  assent  of  the  payee  and 
holder  must  be  regarded  as  at  his  own  sole  risk.  He  is  not 
obliged  to  take  the  bank's  promise  in  place  of  the  Drawer  dis- 
drawer's  indebtedness.  The  promise  of  the  bank  fronfuabiiity 
on  the  drawer's  account,  accepted  as  satisfactory  ^^  holder. 
by  the  creditor,  discharges  the  debtor,  and  at  the  same  time 
deprives  him  of  all  further  concern  or  possible  right  of  action 
in  the  premises. 

(c)  In  Illinois^  and  Tennessee  are  to  be  found  cases  in 
apparent  conflict  with  the  above,  as  to  the  discharge  of  the 
drawer.  But  in  every  case  the  fact  was  that  the  certification 
was  obtained  by  the  drawer  before  he  delivered  it,  and,  as  will 
be  shown  in  the  next  section,  this  distinguishes  the  matter 
from  the  cases  above  and  below,  in  which  the  certification  was 
subsequent  to  issue.  The  language  of  the  judges  is  much 
broader  than  their  facts  require  or  warrant,  as  is  often  the 

^  The  court  in  Massachusetts  expressly  speak  of  the  act  of  certification 
as  "discharging  them  [the  banks]  as  debtor  to  the  drawer."  BuUard  v. 
Randall,  1  Gray.  605. 

«  Bickford  v.  First  National  Bank  of  Chicago,  42  111.  238;  Rounds  i-. 
Smith,  id.  245;  Brown  v.  Leckie,  43  id.  497. 

677 


§  414  ACCKPTANCE    AND    CEnXIFICATION. 

case,  and,  so  lar  as  they  apply  to  the  question  of  subsequent 
certification,  the  lolluwinj^  arguments  of  Mr,  Morse  in  his 
second  edition  seem  a  complete  refutation,  and  mdeed  it  is 
not  at  all  probable  that  the  judges  of  Illinois  or  Tennessee 
would  hold  the  drawer  liable  after  a  post-issue  certification, 
except  by  special  agreement. 

((/)  It  is  said  by  the  judges  that  a  certified  check  does  not 
difl'er  from  an  ordinary  check,  except  that  the  bank  guarantees 
what  otherwise  would  be  only  assumed  ;  viz.  that  the  check  is 
drawn  against  sufficient  funds,  and  will  be  honored  whenever 
jiaymcnt  shall  be  demanded.  If  payment  be  not  in  fact  made 
uj)on  it,  then  the  drawer  is  said  to  be  still  liable.  The  analogy 
of  bills  of  exchange  is  relied  upon,  concerning  which  the  rule 
is,  that,  if  an  accepted  bill  be  not  paid  by  the  acceptor,  it  fur- 
nishes cause  of  action  against  the  drawer.  The  fallacy  of.  this 
argument  seems  perfectly  obvious ;  the  imperfection  of  the 
analogy  is  patent.  The  undertaking  of  the  drawer  of  the  bill 
is  that  it  shall  be  accepted  and  paid  according  to  its  tenor. 
The  undertaking  of  the  holder  of  the  check  is  that  it  shall  be 
paid  if  duly  presented  for  payment.  If  the  bill  be  accepted 
only,  and  not  paid,  the  undertaking  of  the  drawer  is  not  ful- 
filled, and  he  is  liable  accordingly.  But  if  the  holder  of  the 
check  presents  it,  and,  instead  of  demanding  that  payment 
which  alone  the  drawer  authorizes  him  to  demand,  and  which 
alone  the  drawer  engages  shall  be  made,  prefers  or  consents  to 
accept  the  certification  by  the  bank,  then  the  holder  is  clearly 
absolved  from  further  liability.  It  should  be  further  noted;  that 
the  fact  of  acceptance  is  evidence  that  payment  would  have 
been  made,  or  ought  to  have  been  made,  had  it  been  demanded 
at  that  time ;  for  the  bank  has  no  right  to  certify  a  check 
unless  all  those  circumstances  exist  wdiich  would  make  it  the 
duty  tjf  the  bank  at  that  same  moment  to  pay  the  check  upon 
demand.  It  is,  therefore,  the  holder's  own  fault  if  he  takes 
an  acceptance,  when  he  might  have  a  payment.  Even  in  the 
Ito.'^silde  case  of  a  payment  being  demanded  and  refused,  and 
certification  being  accepted  in  lieu  thereof  by  the  holder,  it 
would  seem,  upon  principle,  that  the  drawer  should  be  ac- 
quitted ;  for  the  holder,  by  accepting  and  entering  into  an 
678 


EFFECT   OF    CERTIFICATION.  §  414 

arrangement  not  contemplated  by  the  drawer,  may  be  fairly 
held  to  have  discharged  the  drawer.  Take,  for  instance,  the 
case  of  a  bank,  hard  pushed  for  funds,  persuading  a  check- 
holder  to  accept  a  certification  in  lieu  of  payment.  The  certi- 
fied check,  being  substantially  as  good  as  money,  probably  will 
be  held  or  will  circulate  for  a  few  days  before  it  is  returned 
for  payment.  When  it  is  returned  for  payment,  the  bank  has 
failed.  What  justice  would  there  be  in  holding  the  drawer  to 
make  good  the  amount,  when,  had  payment  been  demanded 
and  insisted  upon,  it  would  cither  ha,ve  been  made,  or  he 
would  have  been  entitled  to  receive  notice  of  the  dishonor 
of  his  check,  and  so  enabled  to  use  any  means  in  his  power 
to  protect  himself  ?  Obviously  this  argument  would  be  much 
weakened,  though  not  destroyed,  if  it  were  understood  between 
the  drawer  and  payee  that  certification  might  be  accepted  in 
lieu  of  payment,  or  if  the  usage  of  business  should  bind  the 
drawer  of  a  check  to  anticipate  a  request  for  certification  as 
being  as  probable  as  a  request  for  payment.  The  usage  of 
business  surely  does  not  bind  the  drawer  to  any  such  antici- 
pation. Even  if  it  did,  it  would  not  unquestionably  follow  that 
the  payee,  having  exercised  his  option  to  take  the  promise  of 
the  bank  instead  of  money,  should  not  be  thereby  concluded 
as  against  the  drawer.  But,  in  the  absence  of  such  an  express 
or  implied  understanding,  the  argument  seems  to  be  plain 
against  the  doctrine  asserted  by  the  court  of  Illinois. 

(e)  Our  view  has  the  authority  of  the  New  York  Court  of 
Appeals,  which  says  that,  so  far  as  the  drawer  of  the  check  is 
concerned,  certification  is  "  precisely  as  if  the  bank   ^^     ,^  , 

,        ,       .  ,       »    New  York. 

had  paid  the  money  upon  that  check,  instead  of 
making  a  certificate  of  its  being  good";    also,  further,  that 
"  the  law  will  not  permit  a  check  when  due  to  be  thus  pre- 
sented, and  the  money  to  be  left  with  the  bank  for  the  accom- 
modation of  the  holder,  without  discharging  the  drawer."  " 

"  The  bank  virtually  says,  That  check  is  good ;  we  have  the 
money  of  the  drawer  here  ready  to  pay  it.     We  will  pay  it 
now  if  you  will  receive  it.     The  holder  says,  No,  I   Drawer  is 
will  not  take  tlie  money ;  you  may  certify  the  check   discharged. 
^  Fh'st  National  Bank  of  Jersey  City  v.  Leach,  52  N.  Y.  350. 

679 


^  414  ACCEPTANCE   AND    CERTIFICATION. 

and  rt'taiii  the  money  for  me  until  this  check  is  presented. 
The  law  will  not  permit  a  check,  when  due,  to  be  thus  pre- 
sented, and  the  money  to  be  left  with  the  ])ank  for  the  ac- 
commodation of  the  holder  without  dischargiuu:  the  drawer. 
The  money  bcinj?  due  and  the  check  presented,  it  is  his  own 
fault  if  the  holder  declines  to  receive  the  pay,  and  for  his  own 
convenience  has  the  money  appropriated  to  that  check  subject 
to  its  future  presentment  at  any  time  within  the  Statute  of 
Limitations."  ** 

"  Ordinarily,  where  the  payee  or  holder  of  a  check  which 
is  payable  immediately,  instead  of  demanding  payment,  pro- 
cures the  check  to  be  certified,  the  check  is,  as  between  the 
drawer  and  holder,  regarded  as  paid,  and  the  holder  must 
look  to  the  bank  whose  obligation  it  has  accepted  in  lieu  of 
the  money  ;  because,  by  procuring  the  certification,  he  has 
caused  an  amount  of  the  drawer's  fund,  or  credit,  equal  to  that 
for  which  the  check  was  drawn,  to  be  set  apart  for  the  pay- 
ment of  that  check  and  withdrawn  from  the  control  of  the 
drawer,  and  his  funds  are  as  efTectually  diminished  as  if 
the  money  had  been  paid  ;  while  the  bank  has  given  a  nego- 
tiable obligation  to  the  holder  of  the  check  which  is 

Equal  to  cer-  .  "^  ,  .    -  -j        ti>  ^i       i     i  i 

tiiiaitc  of  equivalent  to  a  certihcate  ot  deposit.  It  the  holder 
eposit.  ^^  ^j^^  certified  check  should  lose  it,  he  would  still 
have  his  remedy  upon  it  against  the  bank,  but  could  not  have 
recourse  against  the  drawer  whose  funds  had  been  locked  up, 
or  transferred  to  the  credit  of  another  party.  And  even  the 
subse(pient  payment  of  the  check  by  the  bank  upon  a  forged 
indorsement  would  not  relieve  it  of  its  liability  upon  the  con- 
tract it  had  made  with  the  true  owner,  nor  restore  to  the 
drawer  the  right  to  draw  upon  the  bank  for  the  funds  which 
had  been  appropriated  to  the  payment  of  the  check  and  were 
consequently  no  longer  his."  ^ 

Cerfiried  Where  a  certified  check  is  stolen,  and  notice  is 

check  stolen,  ^jy^.j^  f)f  {^q  jqss,  or  the  chcck  is  advertised,  still 
a  /lona  fide  holder  can  recover  upon  it  from  the  bank.^*^ 

*  First  National  Bank  v.  Leach,  52  N.  Y.  353. 
»  Thompson  v.  Rank,  82  N.  Y.  6. 
JO  Nolan  v.  Bank,  G7  Barb.  21. 
680 


EFFECT   OF   CERTIFICATION.  §  414 

(/)  Chief  Justice  Oakley  said,  "  When  the  business  of  the 
bank  is  properly  conducted,  it  is  the  duty  of  the  officer  cer- 
tifying the  check  to  cause  it  to  be  immediately  charged  as 
paid  to  the  account  of  the  drawer;  and  when  this  is  done, 
the  sum  thus  charged  will  remain  as  a  deposit  in  the  bank 
to  the  credit  of  the  check,  and  be  forever  withdrawn  from 
the  control  of  the  maker,  except  as  a  holder  of  the  check. 
Such  a  deposit  stands  upon  exactly  the  same  grounds  as 
any  other,"  "  except  of  course  the  check-holder  cannot  draw 
against  it  in  parts.  A  certified  check  has  a  distinctive 
character,  as  a  species  of  commercial  paper,  the  certification 
constituting  a  new  contract  between  the  holder  and  the  cer- 
tifying bank  ;  the  funds  of  the  drawer  are,  in  legal  contem- 
plation, withdrawn  from  his  credit,  and  appropriated  to  the 
payment  of  the  check,  and  the  bank  becomes  the  debtor  of  the 
holder,  as  for  money  had  and  received.^^  ^g  ^q  ^jjg  drawer 
and  indorsers,  if  there  are  any,  the  certification  is  a  payment 
of  the  check,  and  they  are  no  longer  liable  upon  it.^^ 

(^)  A  California  case  is,  by  analogy,  authority  to  the  same 
effect ;  wherein  it  was  held  that  the  payee,  having  presented 
the  check  for  payment,  which  was  offered,  but  having  then 
decided  to  leave  the  money  in  the  bank  for  his  own  con- 
venience a  few  hours  longer,  the  drawer  was  discharged, 
though  upon  the  second  demand  for  payment,  made  by  the 
payee  on  the  same  day,  payment  was  refused  by  reason  of 
the  failure  of  the  bank.^^ 

By  the  acceptance  or  certification  of  the  check,  a  new  and 
specific  engagement  is  entered    into  by  the   bank   with  the 
holder   and   his   legal   transferees.      This   engage-   check  be- 
ment  is  simply  and  unconditionally  to  pay  to  him   ''"o",*j-se  t^ 
or  them  the  sum  named  in  the  check  on  demand.^^   P^3'- 

"  Willetts  V.  Phoenix  Bank,  2  Dner,  121. 

^2  National  Commercial  Bank  v.  Miller,  77  Ala.  168. 

13  Simpson  v.  Pacific  Mutual  Life  Ins.  Co.,  44  Cal.  139. 

"  Girard  Bank  v.  Bank  of  Penn  Township,  39  Pa.  St.  92;  Farm- 
ers &  Mechanics'  Bank  v.  Butchers  &  Drovers'  Bank,  4  Duer,  219;  16 
N.  Y.  125;  Meads  v.  Merchants'  Bank  of  Albany,  25  N.  Y.  148;  Shars- 
"wood's  note  to  Byles  on  Bills,  p.  21  (Sharswoods  ed  )  ;  Barnes  v.  Ontario 

681 


§  41-i  ACCEPTANCE    AND    CERTIFICATION. 

The  check  ceases  in  fact  to  be  a  clieck,  and  becomes  a  prom- 
ise to  pay.  Accordintily,  the  rules  which  govern  a  check 
no  longer  govern  this  instrument. 

"  There  is  no  difference  between  the  liability  created  by  a 
certified  check  and  by  a  note  of  the  bank  payable  on  demand. 
Each  is  intended  to  circulate  as  money.  The  object  is  to 
enable  the  holder  to  use  the  check  as  money.  By  certifying, 
the  bank  meant  to  give  the  cheek  a  currency  and  value  that 
would  not  otherwise  belong  to  it,  and  this  additional  value 
can  onlv  be  given  by  holding  the  certificate  to  be  an  un- 
conditional promise  of  payment."  ^^ 

(//  I  Certilication  admits  the  genuineness  of  the  drawer's 
signature,  and  the  fact  that  there  are  sufficient  funds.^^  The 
Whatcertifi-  ^'^^G  has  been  laid  down  in  Xew  York,  that  by  the 
cation  aUmits.  j^(,^  Qf  certification  the  bank  undertakes  for  only 
two  facts  ;  viz.  the  genuineness  of  the  drawer's  signature, 
and  the  sufficiency  of  his  account  to  meet  this  demand  ;  that 
it  vouches  for  nothing  further,  either  in  the  body  of  the  check 
or  indorsed  upon  it.^"  The  Supreme  Court  of  the  United 
States  has  adopted  the  same  principle  in  the  case  of  a 
check  only  verbally  declared  to  be  good,  in  response  to  the 
payee's  inquiry  put  to  the  teller;  but  at  the  same  time  ad- 
mitted that  there  might  be  some  doubt  as  to  extending  the 
rule  to  cover  a  case  where  the  bank  had  certified  the  check 
in  writing,  and  so  sent  it  forth  upon  the  market  to  circulate 
virtually  like  money  or  a  certificate  of  deposit.^^ 

(i)  No  evidence  of  usage  among  banks  and  merchants 
Evidence  of  ^^^  regard  certification  as  an  obligation  to  pay  al- 
usage.  though  the  body  of  the  instrument  is  forged,  will 

be  admitted.^^     But   in   Louisiana  a  bank  was  not   allowed 

Bank,  19  N.  Y.  152;  Bickford  v.  First  National  Bank  of  Chicago,  42 
111.  2:;8. 

i"*  In  snbstance,  Bickford  v.  First  National  Bank,  42  111.  243. 

"  Merchants'  Bank  v.  State  Bank,  10  Wall.  004;  Espy  v.  Bank,  18 
"Wall.  601;  PhoMiix  Bank  v.  Bank  of  America,  1  N.  Y.  Leg.  Obs.  26; 
Marine  National  Bank  v.  National  City  Bank.  59  N.  Y.  77. 

1"  Marine  National  Bank  r.  National  City  Bank,  59  N.  Y.  67,  stated ^os^ 

"  Espy  V.  Bank  of  Cincinnati.  IS  Wall.  (iOl. 

i»  Secnrity  Bank  v.  National  Bank,  67  N.  Y.  458. 
682 


EFFECT   OP   CERTIFICATION.  §  4l4 

to   recover   money  paid  upon  a   check    raised   before   certifi- 
cation.20 

Q")    But  the  ordinary  rules  limiting  the  warrant  of  a  cer- 
tification to  signature  and  funds  only  apply  when  the  bank  has 
no  knowledge  of  tlie  history  of  the  instrument,  and    Bank  must 
of  the  facts  connected  with  the  drawing,  delivery,   |ia,nii<^e^by 
indorsement,  &c.     When  a  certified  check  is  pre-   [i|!;[."il,^j°he 
sented  for  information,  if  the  bank  possesses  spe-   f'li^''*  i".  "s 

'  '^  '■  possession  to 

cial  knowledge  it  is  under  the  same  obligation  to  »» inquirer, 
disclose  it  as  a  natural  person,  wlien  omission  would  cause 
injury  to  the  applicant,  who  evidently  intends  to  act  on  the 
reply  of  the  bank.^i 

The  F.  Bank  certified  a  draft  payable  there.  T.,  a  holder 
for  value,  paid  the  draft  to  F.  in  settlement  of  a  balance, 
but  the  F.  refused  it,  saying  that  the  C.  Bank,  which  had 
presented  the  draft  for  certification,  was  then  and  had  been 
for  several  days  owing  the  F.,  and  Avas  insolvent.  Held,  that 
the  F.  was  bound  to  receive  the  certified  draft.^'^  But  in 
the  Court  of  Appeals  it  was  held  that  T.  was  not  a  holder 
without  notice.  The  facts  were,  that  by  custom  of  the  banks 
of  Rochester  negotiable  paper  held  by  a  bank  payable  at 
another  is  certified,  and  returned  as  an  item  of  credit  in  its 
exchange  account,  and  not  as  a  negotiable  instrument.  On 
December  19,  the  C.  Bank  received  from  the  F.  Bank  a  cer- 
tified draft  for  $800,  which  by  custom  the  C.  was  entitled 
to  have  credited  in  its  exchange  settlement  Avith  the  plain- 
tiff on  the  following  morning.  The  same  day  C.  transferred 
said  draft  to  the  defendant  in  settlement  of  its  exchange 
account  Avith  the  latter.  December  20,  there  Avas  a  balance 
due,  after  deducting  the  $800  draft,  in  favor  of  the  plaintiff 
against  the  C,  which  Avas  then  insolvent.  In  settling  the 
account  between  plaintiff  and  defendant,  defendant  claimed 
credit  for  the  draft.     It  appeared  that  defendant  at  time  of 

2"  Louisiana  National  Bank  v.  Citizens'  Bank,  28  La.  An.  189. 

21  Clews  V.  Bank  of  New  York  National  Banking  Association,  89 
N.  Y.  418. 

22  Flour  City  National  Bank  v.  Traders'  National  Bank,  35  Hun,  241, 
105  N.  Y.  550  (June,  1887). 

683 


§  414  ACCEPTANCE    AND    CERTIFICATION. 

reccivintj:  draft  knew  tliere  was  an  exchange  account  between 
the  plaintiff  and  the  C.  Bank,  and  liad  notice  that  the  certifica- 
tion ivas  not  for  purposes  of  negotiation,  but  only  as  a  voucher, 
and  so  was  not  a  holder  for  value  without  notice ;  for  the 
defendant  did  have  notice  that  the  draft  had  been  perverted 
from  the  purposes  for  which  it  was  certified.  Held  that 
such  receipt  of  the  draft  by  defendant  did  not  entitle  it  to 
the  rights  of  nogotial^h'  paper,  and  that  under  the  circum- 
stances defendant  could  not  set  off  such  draft  against  plain- 
tiff's exchange  account. 

(/c)  Acceptance  of  certification  of  a  check  instead  of  pay- 
ment releases  the  drawer,  and  renders  the  collecting  bank 
Drawer  dis-  responsible  to  the  owner  for  the  amount.  The 
ciiargud.  ^aw  prcsunics  damages  to  the  owner ;  and  this 
whether  or  not  the  bank  on  which  the  check  was  drawn 
has  the  funds  to  pay  it  when  presented .^^ 

(0  It  is  clear,  in  any  way  we  look  at  the  question,  that 
the  drawer  is  discharged  by  certification  after  issue.  Suppose 
the  bank  becomes  insolvent,  it  is  clearly  unjust  to  hold  the 
drawer  Avhen  the  payee  could  have  had  the  money  and  chose 
to  leave  it  and  take  the  certification  ;  and  beside,  the  ordi- 
nary rule  of  delay  in  presentment  for  payment  would  dis- 
charge the  drawer.  If,  on  the  other  hand,  the  bank  is 
solvent,  where  is  the  use  of  two  actions,  one  by  the  liolder 
against  the  drawer,  and  another  by  the  drawer  against  the 
bank,  when  a  single  action  against  the  bank  by  the  holder 
will  accomplish  full  justice. 

It  will  not  do  to  say  that  a  check  is  a  bill  of  exchange,  and 
therefore  the  holder  can  sue  the  drawer  if  it  is  dishonored 
after  acceptance.  The  same  argument  would  prove  that  a 
check  could  be  presented  a  day  later  by  collecting  through 
a  banker  than  by  direct  collection,  and  that  the  drawer  of 
a  check  is  absolutely  discharged  by  laches.  Such  reason- 
ing would  convince  us  of  almost  anything ;  for  example,  as 
a  man  is  an  animal,  he  must  have  four  legs,  since  other 
animals  have. 

2»  Essex  County  National   Bank  v.  Bank  of   Montreal,  7  Biss.   193 
(III.  C.  C,  1876). 
684 


BEFORE   ISSUE.  §  415 

§  415.  Certification  before  Issue  does  not  at  once  discharge 
the  Drawer.^  —  Until  the  certified  check  is  issued,  the  fund 
cannot  be  withdrawn  from  the  reach  of  a  garnishee  or  at- 
tachment against  the  depositor.^  If  it  were  otherwise,  a 
depositor  could  cut  off  completely  all  rights  of  attachment 
by  making  out  checks  to  cover  his  deposit  and  retaining 
them  in  his  possession.  It  is  clear  that  the  control  and 
ownership  of  the  deposit  are  still  in  the  drawer  until  the 
check  is  issued,  and  that  an  attachment  against  it  before 
the  check  comes  into  the  hands  of  a  bona  fide  holder  will 
secure  the  funds.  Of  course,  then,  when  a  holder  receives  a 
check  from  the  drawer  certified  before  delivery,  the  drawer's 
liability  to  the  holder  cannot  cease  until  the  bank  has  been 
properly  notified  of  the  issue  of  the  check. 

It  will  doubtless  be  held,  whenever  the  question  arises,  that 
a  check  certified  before  delivery  from  the  drawer  is  taken 
on  the  faitli  of  the  drawer  until  notice  to  the  bank,  or  its 
acknowledgment  of  the  correctness  of  the  acceptance  and 
its  continued  liability  upon  it. 

These  distinctions,  we  think,  will  disclose  the  real  force  of 
the  Illinois  cases.  In  them  the  certification  was  before  de- 
livery, and  upon  the  facts  the  decision  was  perfectly  just 
and  proper,  although  the  language  of  the  judges  was  broader 
than  the  truth,  and  the  judgment  was  filigreed  with  false 
ornament. 

Suppose  again  that  the  drawer  has  his  check  certified,  and 
afterward  issues  it  to  H.,  but  before  the  issue,  or  before  H. 
can  with  reasonable  diligence  present  the  check  for  payment, 
the  bank  fails  ;^  it  is  probable  that  in  such  case  the  drawer 

1  §  415.  First  National  Bank  v.  Leach,  52  N".  Y.  350;  Essex  National 
Bank  v.  Bank  of  Montreal,  7  Biss.  193;  Daniel  on  Neg.  Inst.  §  1601. 

2  Gibson  v.  National  Park  Bank,  98  N.  Y.  87. 

8  After  the  manuscript  is  in  the  hands  of  the  publishers,  there 
comes  to  me  from  Indiana  a  manuscript  copy  of  a  decision  by  Judge 
Walker,  in  the  latter  part  of  1887,  in  the  case  of  the  First  National 
Bank  v.  Born,  which  presented  the  point  made  in  the  text.  On  Sat- 
urday, Born  drew  a  check  on  Ritzinger's  Bank  in  favor  of  the  First 
National  Bank,  and  had  it  certified.  Afterward  at  three  o'clock  (close 
of  banking  hours)  he  delivered  the  check  to  the  First  National  Bank, 

685 


§  415  ACCEPTANCE    AND    CERTIFICATION. 

would  not  be  held  to  be  released  by  any  court.  Tlie  case 
differs  from  those  in  which  the  drawer  is  lield  discharged 
in  the  essential  point,  that  the  holder  could  have  received 
t\\Q  money,  but  chose  to  leave  it  in  the  bank,  malcing  the 
transaction  equivalent  to  payment  and  subsequent  deposit. 
Here  the  holder  never  had  the  opportunity  of  receiving  the 
cash ;  he  took  the  paper  just  as  he  would  take  the  note  of 
a  third  person ;  if  properly  presented  and  the  maker  was  in- 
solvent, the  indorser  would  have  to  make  the  amount  good ; 
but  if  properly  presented  and  the  maker  said  he  could  have 

in  payment  of  a  collection  held  by  it  against  liim.  On  Monday  the  payee 
presented  the  check  to  Ritziiiger's  Bank,  and  demanded  payment.  Pay- 
ment was  refused,  liitzinger's  Bank  having  closed  its  doors  on  the  pre- 
ceding Saturday,  and  never  opened  them  after  that  day.  Born  was  duly 
notified.  After  thorough  consideration,  the  court  held  that  the  drawer 
was  not  discharged. 

In  every  case  where  that  effect  followed  certification,  it  was  clear  upon 
the  facts  that  any  other  rule  would  have  enabled  the  holder  by  his  own 
sole  act  to  enlarge  tlie  drawer's  liability.  In  every  such  case  the  holder 
could  have  obtained  the  money,  but  by  his  own  wish  and  act,  and  with- 
out the  consent  or  agreement  of  the  drawer,  chose  to  have  the  check 
certified.  But  when  the  drawer  himself  secures  the  certification,  the 
case  is  different. 

The  holder  of  a  check  ought  to  have  time  to  get  to  the  bank,  and 
an  opportunity  to  receive  his  money  before  he  can  be  said  to  have 
done  an  act  to  discharge  the  party  giving  him  the  order.  "  Besides, 
it  is  not  true  that  the  drawer  of  the  check  so  certified  has  put  the 
money  beyond  his  control  or  recovery  by  legal  means"  (this  was  the 
argument  of  counsel).  "It  is  only  when  the  holder  is  not  the  drawer 
that  such  is  the  case.  The  money  is  thus  appropriated,  not  to  pay  any 
particular  person,  but  to  pay  a  particular  check.  So  the  drawer  can 
get  it  certified  and  carry  it  as  long  as  he  wants  to,  and  return  it  to 
the  bank,  present  it  like  any  other  holder,  and  receive  his  money,  or  sue 
to  recover  it." 

Checks  certified  before  delivery  do  not  lose,  as  to  the  drawer,  any  of 
the  characteristics  of  uncertified  checks.  "  Nor  do  they  impose  any 
greater  diligence  upon  the  holder,  who  lias  the  same  time  in  which  to 
present  them  as  if  they  were  uncertified.  The  only  effect  of  the  certifi- 
-cation  is  to  give  the  check  additional  currency,  by  carrying  with  it  the 
evidence  that  it  was  drawn  in  good  faith  on  funds  sufficient  to  meet  its 
payment,  and  lending  to  it  the  credit  of  the  bank  in  addition  to  the  credit 
of  the  drawer." 

686 


BEFORE   ISSUE.  §  416 

the  money,  and  the  holder  said  no,  he  would  leave  it  with 
the  maker,  then  surely,  whether  the  paper  be  note,  check, 
bill,  or  what  not,  the  indorser  or  drawer  would  have  nothing 
to  do  with  the  matter  thereafter.  And  the  case  also  differs 
from  that  of  payment  in  bank  bills,  for  here  the  paper  carries 
on  its  face  proof  as  to  tvho  is  liable,  if  any  one  is,  while  an 
equal  certainty  cannot  be  attained  in  the  case  of  bank  bills 
without  embarrassing  commerce. 

The  drawer  who  has  a  check  certified  before  delivery  stands 
in  the  same  position  as  an  indorser  of  a  certified   indorsee  of 
check,  and  it  is  settled  that  such  indorser  can  be   eS^,e^I{!*^hoi(ig 
held  by  the  indorsee.^  indorser. 

In  Tennessee  we  have  a  decision,  in  1872,  that  the  drawer 
who  has  a  check  certified  before  delivery  is  liable  to  the 
holder,  as  well  as  the  bank.  (§  416.)  And  though  the  lan- 
guage is  sweeping,  it  should  be  limited,  both  in  this  and  in 
the  Illinois  cases,  to  the  facts  present  to  the  mind  of  the 
judge. 

§  416.  Presentment  to  hold  Drawer.  —  To  render  the  drawer 
liable  on  a  check  that  has  been  certified  (before  issue),  the 
holder  must  present  it  within  the  business  hours  of  the  day 
following  its  receipt.  "  We  have  been  referred  to  no  au- 
thority, nor  are  we  aware  of  any,  in  which  it  is  held  that 
the  fact  of  certification  of  a  check  either  discharges  the 
drawer  absolutely  from  liability  to  the  holder,  or  changes 
the  law  of  demand  and  notice  which  governs  the  relation 
between  the  holder  and  drawer.  ...  It  is  no  doubt  true 
that  the  credit  of  the  check  may  rest  mainly  on  the  fact 
that  the  bank  is  primarily  liable,  but  it  is  made  stronger  by 
the  fact  that  the  drawer  stands  as  surety  for  the  bank.  .  .  . 
It  is  still  a  check,  and  because  of  its  certification  and  thereby 
of  the  bank's  promise  to  pay  it,  its  approximation  to  money 
and  its  negotiability  in  market  are  increased."^ 

A  check  was  presented  four  years  after  certification,  and 
payment   refused.     The  court  held  the  bank  bound  to  pay 

*  Mutual  Bank  v.  Rotge,  28  La.  An.  9;'>3. 

1  §410.  Andrews  v.  German  National  Bank,  9  Heisk.  211  (1872); 
Schoolfield  v.  Moore,  9  Heisk.   171.     But  see  below. 

687 


§  418  ACCEPTANCE   AND    CERTIFICATION. 

Drawer  (lis-  without  regard  to  the  drawer's  account,  and  that 
doubly.  the  drawer  was  discharged  from  liability  both  on 

the  check  and  on  tlic  original  consideration."^ 

§  417.  Attachment  of  Deposit  that  is  covered  by  Certified 
Check.  —  A  railroad  company  obtained  from  a  bank  a  certi- 
fied check  for  tlie»amount  of  its  deposit,  payable  to  the  order 
of  its  treasurer,  and,  while  it  was  outstanding,  a  creditor  of 
the  company  in  a  suit  against  the  company  served  a  warrant 
of  attachment  n})on  tlie  bank.  The  company's  treasurer 
afterwards  deposited  the  check  to  his  individual  account, 
and  drew  against  it  from  time  to  time  to  pay  the  debts 
of  the  company.  The  bank  had  reason  to  believe  that 
the  check  was  owned  by  the  company,  and  that  the  money 
was  used  to  pay  its  debts,  as  was  really  the  case.  It  was 
therefore  held  that  the  bank  was  liable  for  allowing  the 
funds  belonging  to  the  company  to  escape  from  the  grip  of 
the  attachment-^ 

§  418.  The  statute  of  Limitations.  —  The  Statute  of  Limi- 
tations only  begins  to  run  against  the  liability  of  the  bank  at 
the  time  when  demand  for  payment  is  made.^  The  rule  is 
thus  laid  down  in  the  case  cited,  but  it  is  probable  that  if  any 
tribunal  inclined  to  hold,  in  the  case  of  any  ordinary  deposit 
account,  that  the  statute  began  to  run  in  favor  of  tlie  bank 
from  the  date  of  the  last  transaction  between  it  and  the  de- 
positor, analogy  would  lead  the  same  bench  to  declare  that 
the  statute  would  begin  to  run  against  the  holder  of  a  cer- 
tified or  accepted  check  from  the  date  of  the  bank's  promise 
upon  it.  This  may  be  directly  inferred  also  from  the  lan- 
guage of  the  court  in  the  case  of  the  Farmers  and  Mechanics' 
Bank  v.  Butchers  and  Drovers'  Bank,  cited  below.  The 
check  itself  is,  in  its  new  form,  strictly  "  evidence  of  a  deposit 
to  the  credit  of  the  holder."  ^     All  the  rules  about  present- 

2  French  v.  Irwin,  4  Baxter,  401  (Tenn.,  1874). 

1  §  417.  Gibson  r.  National  Park  Bank,  98  N.  Y.  87.  See  contra,  Bills 
V.  National  Park  Bank,  47  N.  Y.  Superior  Court,  302. 

1  §  418.    Girard  Bank  v.  Bank  of  Penn  Township,  39  Pa.  St.  92. 

2  Farmers  &  IMechanics'  Bank  i\  Butchers  &  Drovers'  liank,  4  Duer, 
219;  IG  N.  Y.  125. 

688 


STATUTE    OF    LIMITATIONS.  §  418 

ment  for  payment  at  once  fall  to  the  ground.  Tlie  holder 
need  no  longer  regard  the  condition  of  the  drawer's  account 
or  balance  with  the  bank.  The  bank  is  bound  to  withhold 
enough  from  the  depositor's  funds  to  meet  the  demand  of  the 
holder  whenever  it  may  be  made.  No  lapse  of  time  before 
making  the  demand,  unless  it  should  be  held  that  the  Statute 
of  Limitations  had  run,  is  laches  upon  the  part  of  the  holder, 
or  infringes  his  rights  against  the  bank  or  the  bank's  duty 
towards  him.  If  in  the  interval,  no  matter  how  long  it  be, 
the  bank  has  allowed  the  drawer  by  his  checks  or  otherwise 
to  reduce  his  balance,  or  even  wholly  to  withdraw  it,  yet  the 
bank  remains  primarily  liable  on  its  original  contract.  It 
must  make  up  any  deficit  from  its  own  funds.  Even  if  at  the 
time  of  acceptance  there  were  not  funds  of  the  drawer  suffi- 
cient to  meet  the  check,  the  bank  must  still  keep  its  promise. 
Delay  of  two  months  and  withdrawal  of  the  drawer's  funds 
in  the  interval,^  and  again  delay  of  one  year,*  were  held  not 
to  impair  at  all  the  liability  of  the  bank.  Far  the  strongest 
case  that  has  arisen  is  that  of  the  Girard  Bank  v.  Bank  of 
Penn  Township,^  where  the  check  was  certified  Oct.  7,  1852 ; 
the  drawer's  funds  were  not  drawn  out  until  Oct.  10,  1854; 
and  the  check  was  not  presented  for  payment  till  Sept.  3, 1859. 
But  the  period  of  the  Statute  of  Limitations  had  not  elapsed 
since  the  certification,  even  if  it  could  have  begun  to  run  at 
all  prior  to  the  demand,  and  the  court  did  not  hesitate  to  hold 
the  bank  liable. 

This  doctrine  seems  simple  enough.  Yet  the  number  of 
cases  in  which  it  has  been  questioned  by  counsel,  and  reiter- 
ated by  the  court,  intimate  a  lurking  belief  in  the  existence 
of  some  theory  which  runs  counter  to  it,  and  which  is  suffi- 
ciently sound  to  expect  judicial  support.  This  is  doubtless 
to  be  sought  in  the  form  or  phraseology  by  which  it  is  cus- 
tomary for  the  bank  to  accept  or  certify  the  check.  This  is 
not  ordinarily  done  by  writing  any  distinct  words  indicative 

»  Willetts  V.  The  Pha?nix  Bank,  2  Duer,  121. 

*  Farmers  &  Mechanics'  Bank  i;.  Butchers  &  Drovers'  Bank,  4  Duer, 
219;  16  N.  Y.  125. 
«  39  Pa.  St.  92. 

VOL.  I.  44  689 


§  418  ACCEPTANCE    AND    CEUTIP^ICATION. 

in  terms  of  a  promise  or  undertaking  to  pay,  bui  simply  by 
writing  on  the  check,  in  the  handwriting  of  the  officer  com- 
petent to  enter  into  the  contract  on  behalf  of  the  bank,  the 
word  "  Good."  Sometimes  the  officer  adds  to  this 
his  own  initials.  Sometimes  he  writes  his  own 
name  or  initials  without  anything  more.  Other  methods 
may  be  in  use  in  various  places.  In  England,  until  a  statute 
was  lately  passed  requiring  words  importing  a  distinct  prom- 
ise to  be  written  and  signed,  a  simple  mark,  not  being  a  word 
at  all,  or  otherwise  intrinsically  intelligible,  was  often  placed 
upon  the  checks.^  They  are  called  in  the  English  cases 
"  marked  checks."  It  seemed  therefore  not  wholly  inapt  to 
argue  that  these  words,  initials,  or  marks,  at  the  very  most, 
purported  only  to  be  memoranda  or  notes  showing  the  pre- 
sentment of  the  check,  and  the  fact  that  at  the  time  of  pre- 
sentment no  obstacle  stood  in  the  way  of  payment  by  the 
bank.  In  other  words,  they  signified  that  at  that  time  the 
drawer's  balance  was  good  for  the  amount  of  the  check.  They 
conveyed  information,  but  not  a  promise.  More  meaning,  it 
was  considered,  could  not  be  introduced  into  them ;  they  cer- 
tainly did  not  state  a  promise,  and  it  was  too  much  to  let 
unintelligible  letters  or  words  create  a  binding  obligation  to 
pay  large  sums  of  money,  for  which  no  consideration  from  the 
promisee  had  ever  been  received  by  the  promisor.  Neither 
could  they  be  wrenched  into  promising  that  the  bank  would 
continue  to  keep  the  drawer's  balance  good  for  this  amount, 
for  the  sole  benefit  of  this  holder,  for  any  indefinite  period 
that  he  might  choose  to  keep  the  check  out.  To  these  argu- 
Usage  must  mcnts  the  only  answer  was  that  the  words,  initials, 
govern.  ^j,  jj-j^pi^g  were  to  be  construed  by  the  light  of  the 

well  known  usage  of  business  ;  and  being  thus  construed  there 
could  be  no  question  that  they  were  designed,  and  were  always 
clearly  understood  by  all  parties  concerned,  to  be  a  perfected 
contract  on  the  part  of  the  bank.     It  was  not  pretended  that 

^  Grant  on  Bankers  and  Banking,  p.  56  et  seq.,  and  cases  cited;  espe- 
cially, Robson  V.  Bennett,  2  Taunt.  .'388;  Stevens  v.   Hill,   5  Esp.  247. 
For  the  present  law  in  England,  see  Duf aur  v.  Oxendeu,  1  M.  &  Rob.  90 ; 
Corlett  r.  Conway,  5  M.  &  W.  655. 
690 


STATUTE   OP   LIMITATIONS.  §  419 

they  were  written  without  any  object  whatsoever,  at  they 
meant  absolutely  nothing.  Yet  among  them  all  the  word 
"  Good  "  was  the  only  word  or  mark  which  could  possibly  have 
any  independent  meaning;  and  of  that  the  meaning  was 
doubtful.  Since,  therefore,  extrinsic  facts  and  banking  usage 
must  be  introduced  to  explain  them,  why  not  let  it  really  and 
thoroughly  explain  them,  and  not  merely  go  through  a  false 
pretence  of  doing  so  ?  They  were  a  brief  symbol,  well  under- 
stood by  all  the  business  world  to  signify,  and  ordinarily 
accepted  as  identical  with,  an  elaborate  promise.  The  argu- 
ment in  favor  of  the  banks  was  only  plausible ;  the  reply  was 
incontrovertible.'^  "  The  bank,  instead  of  being  prejudiced,  is 
benefited  by  the  delay  of  its  owner  in  calling  for  its  payment, 
and  can  with  no  more  propriety  impute  laches  to  the  unknown 
holder  of  the  check  than  to  a  known  holder  of  an  ordinary 
deposit.  .  .  .  There  is  in  reality,  in  good  sense,  no  distinction 
in  the  nature  of  the  liability  created  between  a  certified  check 
and  the  note  of  the  bank  payable  on  demand.  Each  is  in- 
tended to  circulate  as  money,  each  is  an  absolute  promise  to 
pay  a  specific  sum  upon  demand,  and  laches  in  making  the 
demand  is  no  more  imputable  in  the  one  case  than  in  the 
other."  8 

§  419.  Certification  by  Mistake.  —  If  the  check  has  COme 
to  a  bona  fide  holder  since  the  certification,  or  the  holder 
would  be  prejudiced  by  the  bank's  recovery  on  account  of  its 
mistake,  the  bank  is  estopped  from  such  recovery ;  but  a  mis- 
taken certification  can  be  corrected  before  loss  to  an  innocent 
party  has  occurred  in  consequence  of  it.^  If  the  bank  cer- 
tifies the  check  by  mistake,  under  the  erroneous  impression 
that  it  has  sufficient  funds  of  the  drawer  to  apply  upon  it, 
and  if  the  discovery  is  made  with  reasonable  promptitude  and 
immediately  notified  to  the  holder;  if  the  check  itself  still 
remains  in  the  hands  of  the  party  who  presented  it  for  cer- 
tification, and  if  his  position  is  precisely  the  same  after  the 

■^  Willetts  V.  Phoenix  Bauk,  2  Duer,  121. 
8  Ibid.,  132. 

1  §  419.    Bank  v.  Baxter,  31  Vt.  101;  Second  National  Bank  v.  West. 
National  Bank.  51  Md.  128. 

691 


§  419  ACCEPTANCE   AND    CERTIFICATION. 

revocation  that  it  would  have  been  had  the  bank  originally 
refused  acceptance;  if  he  has  not  lost  his  opportunity  to 
charge  indorsers  ;  if  he  has  parted  with  no  collateral  security, 
has  released  no  sureties,  has  not  had  his  power  of  collection 
from  the  drawer  of  the  check  diminished  by  any  intermediate 
occurrence,  —  then  it  seems  that  it  is  not  too  late  for  the  bank 
still  to  undo  its  mistake.^  If  the  mistake  plus  its  revocation 
would  prejudice  an  innocent  party,  there  can  be  no  recovery, 
but  if  the  circumstances  are  such  that  all  innocent  parties  are 
in  the  same  position  as  if  the  bank  had  refused  to  certify  at 
first,  then  it  may  be  revoked. 

2  Irving  Bank  v.  Wetherald,  36  N.  Y.  335.     See  also  Watervliet  Bank 
V.  White,  1  Den.  608. 

692 


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